This article examines how the 2022 Russian invasion of Ukraine affected the investment and financing policies of small and medium-sized (SMEs) enterprises in Ukraine and neighbouring Russian border regions. Using a matched difference-in-differences framework with SMEs from Belgium and the United Kingdom as comparison firms, we document substantial within-firm changes during the war period. Ukrainian SMEs exhibit lower investment and higher cash holdings, a pattern consistent with precautionary liquidity motives. Short-term debt declined overall during the war period, while long-term debt increased modestly. This pattern is suggestive of a shift in debt maturity among firms that retained access to external finance. Trade credit relative to sales increased, whereas trade credit relative to assets declined, a pattern consistent with tighter supplier exposure despite ongoing obligations. Russian border-region SMEs show higher investment relative to the comparison group and experienced a contraction in trade credit relative to assets, pointing to heterogeneous adjustment patterns across institutional contexts. Older and medium-sized firms show stronger investment adjustment and maturity shifts. Younger and smaller firms rely more on short-term liquidity management and experience sharper contractions in trade credit. JEL classification: G32; D74.
Deloof et al. (Mon,) studied this question.