Geopolitical conflicts and European MNE strategy: The outcomes of staying or leaving Russia

Shaker Ahmed, Denis Davydov and Laura Solanko

No 5/2026, BOFIT Discussion Papers from Bank of Finland Institute for Emerging Economies (BOFIT)

Abstract: Geopolitical conflicts force multinational enterprises to make difficult choices between protecting their operations in a host country and preserving their standing among stakeholders at home, even when formal sanctions do not require firms to exit. Whether to remain in a conflict-affected market is also often an ethical decision. Using panel data on more than 8,000 listed European firms from 2010 to 2024, we compare corporate outcomes following Russia's 2014 annexation of Crimea and its 2022 full-scale invasion of Ukraine. We find that the 2014 shock produced little change in operating performance and modest deleveraging among firms with a Russian market presence, compared to those without. After 2022, firms that remained in Russia experienced stronger sales and employment growth than firms that completed their exit, without corresponding improvements in profitability or changes in leverage. Stayers experienced a larger post-2022 increase in media-based ethical scrutiny, whereas firms that completed their exit experienced a larger increase in idiosyncratic volatility. These findings suggest that corporate decisions to withdraw from an aggressor state are not necessarily associated with a consolidated profitability penalty, while decisions to stay may entail greater ethical scrutiny.

Keywords: Business strategy; Self-sanctions; Reputational risk; European firms; Russia (search for similar items in EconPapers)
JEL-codes: D22 F51 L2 M14 (search for similar items in EconPapers)
Date: 2026
New Economics Papers: this item is included in nep-bec
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/343073/1/1981175210.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofitp:343073

Access Statistics for this paper

More papers in BOFIT Discussion Papers from Bank of Finland Institute for Emerging Economies (BOFIT) Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().