Researchers at Yale’s School of Management have found that, among the 1,200 foreign companies that had been active in Russia prior to the invasion of Ukraine, equity markets are rewarding those that have left the country while punishing those that stay. 

The study, led by the academics running the definitive, go-to list of companies withdrawing or staying in Russia, found that said companies’ stock performance generally corresponded with the degree of their Russian exit, something that held true across regions, sectors and company sizes. While this may be true for most regions, Investment Monitor notes that the exception to the rule lies among Chinese and Indian companies, many of which have actually been punished by consumers and markets for not staying in Russia.

The researchers contend that there has been disproportionate focus on asset write-downs and lost revenue from Russia – indeed, a recent study (from the same team) showed that revenue drawn from the (near) 1,000 companies curtailing or ending operations in Russia is equivalent to approximately 45% of Russia’s GDP.

The gains of leaving Russia outweigh the losses

In this new report, however, Yale School of Management demonstrates that the shareholder wealth created through equity gains by leaving Russia has already far surpassed the cost of one-time impairments for companies that have written down the value of their Russian assets. 

“Furthermore, we find the pattern of financial markets rewarding companies for exiting Russia is not confined to only public equity markets through our analysis of credit and derivative markets, in particular longer maturity corporate debt, credit spreads and related credit default swap pricing, showing that the investor response has been incredibly broad-based across financial markets,” the team wrote in the paper’s abstract.

“Our sweeping analysis of global capital flows demonstrates the importance investors attribute to the decision to withdraw from Russia – and that investors believe the global reputational risk incurred by remaining in Russia at a time when nearly 1,000 major global corporations have exited far outweigh the costs of leaving,” the team added. “Clearly, doing well has not been antithetical to doing good – at least when it comes to withdrawing from Russia.” 

Yale’s findings are corroborated by other recent studies such as the 2022 Edelman Trust Barometer Special Report: The Geopolitical Business, conducted in 14 countries with 14,000 respondents in the past month. It finds that there is a new expectation of business action in the geopolitical realm. 

In fact, nearly all of its respondents say that they expect corporations to act in response to an unprovoked invasion in countries where they do business, be it by applying political and economic pressure or publicly speaking out against the aggressor. 

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Meanwhile, nearly half of those responding to Edelman’s survey said they have bought or boycotted brands or companies based on their response to the invasion of Ukraine. Another key finding is that employees are significantly more loyal to an employer (79% versus 55%) and willing to recommend that employer (80% versus 54%) if the Ukraine response has met their expectations.

The conclusion from Yale and Edelman is simple. It pays for companies to leave Russia.