Firm Performance Under Military Occupation: The Case of Ukrainian Firms

This paper examines the effect of military occupation on firm performance during Russia's full‐scale invasion of Ukraine. Combining official data on territorial control with firm‐level balance‐sheet data from Orbis, we exploit quasi‐random variation in occupation status across postal areas in 2022‐2023 using an event‐study design. We document strongly asymmetric effects by occupation duration: firms in short‐term occupied areas experienced a temporary and largely insignificant decline in sales and employment followed by recovery after liberation, whereas firms under prolonged occupation suffered large, persistent losses in sales and employment. Capital dynamics do not differ significantly between occupied and never‐occupied firms, suggesting that occupation operates primarily through channels other than direct capital destruction. Heterogeneity across sectors and firm characteristics is consistent with local demand shortages, supply‐chain disruptions, and institutional uncertainty as the main transmission channels. Overall, these findings highlight that prolonged military occupation entails lasting and sizable economic losses that compound over time, with little evidence of recovery until liberation.