Does socially non-compliant corporate behavior lead to underperformance? Event analysis related to the Russia–Ukraine conflict and the CELI list

Following the escalation of Russia’s invasion of Ukraine in February 2022, the conflict prompted extensive economic sanctions against the Russian Federation. This study examines the stock performance of companies across various countries and continents that either continued business operations in Russia or chose to withdraw. Using signaling theory in the context of military conflict, we apply multiple event study methodologies. Companies are categorized based on their engagement in Russia, using the CELI list as an ESG-equivalent signal to construct distinct portfolios. These are tested against several EU sanctions packages, accounting for different estimation windows. Results show that European companies that exited Russia outperformed those that remained, suggesting that markets reward compliance-oriented behavior. However, industrial and geographical factors also influence the results. Our findings emphasize the importance of strategic decision-making under geopolitical risk and encourage investors to consider conflict risk. Furthermore, we recommend regulators incorporate socially responsible investing into policy frameworks to promote ethical conduct.