Banking sector's reaction during the Russian invasion of Ukraine: who reacted the most?

Purpose This study aims to investigate the market reaction to the Russian invasion of Ukraine, specifically in the banking sector. Design/methodology/approach The research uses an event study and cross-sectional analysis, with market reaction measured by cumulative abnormal return (CAR). The sample comprised 1,126 banks. Findings The results show that the market reacted negatively to the invasion both before and after its announcement. Developed and emerging markets saw a negative impact from the invasion, while frontier markets experienced only a slight impact. The authors also find that the banking markets of North Atlantic Treaty Organization (NATO) members reacted significantly and negatively both before and after the invasion was announced. This demonstrates that the negative market reaction of NATO members was more impactful than that of other markets. Overall, this study shows that investors in the banking market are very sensitive to war. Originality/value This is the first study to provide international evidence, specifically on the banking sector's reaction during the Russian invasion of Ukraine.