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The invasion of Ukraine and the energy crisis: Comparative advantages in equity valuations

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  • Ferriani, Fabrizio
  • Gazzani, Andrea

Abstract

We study the impact of the widening energy price differentials caused by the war in Ukraine on the returns of European and US firms. Using several measures of firms’ exposure to energy consumption, we show that return differentials between European and US firms widened significantly after the outbreak of the war in Ukraine. Our results indicate a persistent comparative disadvantage between the two regions, driven by heterogeneous energy costs, which has continued even after the partial subsiding of the energy shock by the end of 2022. These findings suggest that, the combination of higher energy costs and more vulnerable energy supplies may have lasting economic implications for Europe, potentially exacerbating its competitiveness disadvantages compared with other geographic regions that have access to more affordable and safer energy inputs.

Suggested Citation

  • Ferriani, Fabrizio & Gazzani, Andrea, 2023. "The invasion of Ukraine and the energy crisis: Comparative advantages in equity valuations," Finance Research Letters, Elsevier, vol. 58(PD).
    • Handle: RePEc:eee:finlet:v:58:y:2023:i:pd:s1544612323009765
    DOI: 10.1016/j.frl.2023.104604
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    More about this item

    Keywords

    War in Ukraine; Energy impacts; Energy comparative advantage; Financial performance;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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