Spillover effects of geopolitical risk on the banking sectors of post-Soviet countries

Sheeja Sivaprasad, Roberta Adami, Issam Malki, Dildora Ibragimova and Feruza Yodgorova

Review of Behavioral Finance, 2025, vol. 17, issue 3, 544-562

Abstract: Purpose - This study examines the spillover effects of geopolitical risks on the banking sectors of a sample of post-Soviet countries, focusing on the consequences of the Russian–Ukrainian conflict. Design/methodology/approach - We use the geopolitical risk (GPR) index from Caldara and Iacoviello (2022) as a global measure of geopolitical risk and the Diebold–Yilmaz (2012) connectedness model to estimate the spillover effects of the conflict on the performance of financial institutions. We also conduct a network analysis to examine the transmission effects among banking sectors further. Findings - Our results show little or no significant evidence of GPR transmissions on the financial sector’s performance (returns) and risk in the countries examined. Practical implications - This study allows for a better understanding of GPR transmission mechanisms and the consequences of the conflict on Russia’s neighbouring countries. It can also support policymakers and financial institutions in formulating risk management strategies. Originality/value - This study bridges the existing gap in the literature by examining the effects of GPR events that occurred in the post-Soviet region from 2017 to 2023 on the banking sectors of a selected sample of CIS countries. These economies have not yet received as much academic attention as other developed and developing countries. However, the geographical, historical and cultural proximity of the post-Soviet countries examined to the parties involved in the Russia–Ukraine conflict makes this research particularly relevant.

Keywords: Geopolitical risk; Post-Soviet countries; Banks; Spillover; Russian–Ukrainian conflict; F30; G20; G21 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:rbfpps:rbf-01-2025-0026

DOI: 10.1108/RBF-01-2025-0026

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