Impact of the Russia–Ukraine war on small and medium sector in southeast Asia and China

Purpose - This study aims to analyze the stock market reaction of the small and medium sectors in the Southeast Asian countries (SEACs), including China, to the Russia–Ukraine war. Design/methodology/approach - This study uses the event study methodology to quantify the magnitude and direction of the impact of the Russia–Ukraine war on the performance of small and medium indices of SEACs. Assuming market efficiency, this study uses the market model to capture abnormal returns on the event date and across the event window. Findings - The Russia–Ukraine war adversely affected most of the sample countries, with a prolonged impact over the 50-day post-event window. In most cases, the study has failed to establish statistical significance for the results. One major reason for the low impact is the proactive role of the governments of the SEACs in mitigating the war’s impact on their respective economies by providing subsidies, exercising price controls and stockpiling. Originality/value - To the best of the authors’ knowledge, this study is the first to analyze the impact of the Russia–Ukraine war on the small and medium sectors of SEACs, including China. It highlights the importance of geographic proximity and the proportion of bilateral trade in understanding how war and geopolitical tensions affect the stock market performance in other countries in the current global scenario. In addition, this study uses a range of parametric and nonparametric tests that adjust for the cross-country dependence and event-induced volatility to substantiate the statistical significance of the results and this supports the robustness of the results.