Stock market effects of military conflicts on defence industry

António Miguel Martins

International Journal of Islamic and Middle Eastern Finance and Management, 2024, vol. 17, issue 5, 1014-1026

Abstract: Purpose - This paper aims to examine the short-term market reaction for the world’s 100 largest listed defence firms at and around the three recent largest threats to the global economy – Ukraine–Russia war, Fourth Taiwan Strait Crisis and the Hamas terrorist attack on Israel. Design/methodology/approach - The author examine the impact of the three recent largest threats to the global economy in the largest listed defence firms using an event study methodology. Findings - The results show a positive and statistically significant short-term reaction around the three geopolitical threats. The results also reveal the existence of higher abnormal returns for defence firms with greater weight of defence sales, in line with the captured regulator theory and for firms with higher research and development and capital expenditure intensity. Originality/value - The effect of the war on stock markets has been relatively little examined in the financial theory. This study intends to fill this gap in the literature through the analysis of the three recent largest threats to the global economy.

Keywords: Geopolitical threats; Defence industry; Event study; Abnormal returns (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eme:imefmp:imefm-01-2024-0019

DOI: 10.1108/IMEFM-01-2024-0019

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