Leaving Russia, a good choice for companies listed so far

Leaving Russia, a good choice for companies listed so far

(BFM Bourse) – About a thousand companies have decided to withdraw from Russia after the military invasion of Ukraine under the pretext of “denazification” that began on February 24. Those who prefer to cut ties, often at the cost of significant devaluation, have nevertheless made the right decision, according to a study by Yale University.

The attack on Ukraine has posed a dilemma for companies historically based in Russia: simply ceasing to operate in a country that has committed such aggression against another sovereign state, staying in place to honor the work-in-progress, but without carrying out any new project or more or less as if nothing happened? The decision is based on both moral and economic considerations, also taking into account the impact of international sanctions.

Withdrawals have multiplied rapidly, and more than three months after the start of the conflict, market sanctions now seem clear: leaving Russia was the best financial option, with many companies gaining even more in capitalization than they lost on asset write-offs. , according to a study by Jeffrey Sonnenfeld, Steven Tian, ​​Steven Zaslavsky, Yash Bhansali and Ryan Vakil of the Yale University School of Management in the United States.

Professor Sonnenfeld and his team have compiled a list of more than 1,200 large companies that have publicly expressed their views on whether or not to maintain their activities in Russia, through financial newspapers, regulatory statements to market authorities, press releases, etc., as well as various non-public sources (especially the Yale Alumni Network). These companies were then divided into five groups: A – withdrawal made by depreciating their assets on site B – activity suspended but retained the opportunity to return C – some activities continued but were significantly revised downwards D – volume of activity maintained but new projects frozen F – a company completely resistant to the challenges of leaving Russia

The researchers then looked at companies’ performance based on their ratings and found that companies with an F rating (often used for “failed”) were worse than their counterparts. For example, among US firms, and between February 23 and April 8, full withdrawal firms (70 A ratings) gained an average of 4.36%, while firms with an F rating (16) earned nothing. Among European companies, 64 companies with an A rating gained 3.44% on average, while companies with an F rating (29 companies) lost an average of 8.12%.

A clean break that pays off

It is clear from this analysis that the performance of companies that made a clear flight or a permanent departure from Russia was much better than companies that stubbornly resisted the demands to limit their activities in the country. In addition, several companies that recorded significant asset write-downs – Heineken, Shell, Exxon, Carlsberg, AB InBevand General Societies – in fact, they benefited from value creation (in terms of increasing their capitalization) much greater than accounting losses. Together, the six groups erased $ 14 billion from their balance sheets, but “regained” $ 39 billion in capitalization. BP, for its part, experienced the greatest depreciation – $ 25 billion – and unless the British fully mobilized them during the study, the stock still performed well.

“It is clear that the recipients of funding [investisseurs] they clearly believe that the risks associated with staying in Russia, when almost 1,000 multinational companies have decided to withdraw, clearly outweigh the costs of withdrawal.

Guillaume Bayre – © 2022 BFM Bourse


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