Laurent Weill (University of Strasbourg) - Investment under Fire: Firm-Level Evidence from the War in Ukraine

BOFIT-seminaarit

BOFIT Seminar - Laurent Weill (University of Strasbourg) - Investment under Fire: Firm-Level Evidence from the War in Ukraine

Co-authors: Zuzana Fungáčová (BOFIT) and Axelle Heyert (Université du Québec à Montréal)

Abstract
This study examines the impact of Russia’s full-scale invasion of Ukraine on firm-level investment. We use a difference-in-differences approach and data on around 500,000 firms combined with highly granular conflict data. We show that investment declined significantly following the invasion, with a sharper contraction among firms located in Russian-occupied areas. The negative investment response is further amplified by the intensity of the conflict. We observe that war exposure reshapes the mechanisms through which firm fundamentals influence investment. In conflict zones, the usual scale advantage of larger firms erodes, while liquidity becomes a more powerful driver of investment. By contrast, firms in war-related industries increase their investment during the conflict, regardless of their war exposure. These findings inform about the corporate strategy under adversity and provide important input for designing targeted policies to sustain private investment and supporting the post-war recovery.

Online BOFIT seminars are open to all researchers interested in the subjects covered. The seminar will be recorded and the recording will be shared only with registered participants. Those wishing to attend a seminar are kindly asked to register in advance, by filling in the Online Registration Form.

The registration for the seminar is open until 9:00 am the day of the seminar. You will receive a link to join the seminar by email at the latest one hour before the seminar is scheduled to begin.