SME, Crisis and Geopolitical Risk: Lessons from COVID-19 and War

Tonmoy Choudhury (), Amer Al Fadli, Nataly Butros and Abubaker Fadul
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Tonmoy Choudhury: Rochester Institute of Technology of Dubai, Dubai Silicon Oasis, Dubai P.O. Box 341055, United Arab Emirates
Amer Al Fadli: Rochester Institute of Technology of Dubai, Dubai Silicon Oasis, Dubai P.O. Box 341055, United Arab Emirates
Nataly Butros: Rochester Institute of Technology of Dubai, Dubai Silicon Oasis, Dubai P.O. Box 341055, United Arab Emirates
Abubaker Fadul: Saudi Aramco, Dhahran P.O. Box 5000, Saudi Arabia

JRFM, 2025, vol. 18, issue 11, 1-12

Abstract: This paper explores how geopolitical risk impacts small and medium-sized enterprises (SMEs), focusing on the COVID-19 pandemic and the Russia–Ukraine war. Using daily return data from the ECPI Italy SME Equity and Shenzhen SME Composite indexes, as well as the Global Geopolitical Risk Index, this study employs a Dynamic Conditional Correlation GARCH model to analyze how correlations change over time. The results show that Asian SMEs, represented by China, exhibit higher short-term volatility but stronger long-term resilience than their European counterparts. Notably, Asian markets react consistently across crises, while European markets distinguish between different events. These findings provide important insights for policymakers, suggesting the need for standardized crisis response frameworks and emphasizing short-term mitigation efforts. This study adds to SME theory by highlighting the complex relationship between geopolitical shocks and SME performance, with important implications for risk management and regulatory strategies in emerging economies.

Keywords: COVID; crisis; war (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2025
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