War impact on the market value of the industrial complex enterprises of Ukraine
-
DOIhttp://dx.doi.org/10.21511/imfi.20(1).2023.28
-
Article InfoVolume 20 2023, Issue #1, pp. 328-341
- Cited by
- 638 Views
-
225 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
The purpose of the paper is to assess the war impact on the market value of the industrial complex enterprises of Ukraine. This is an important task for determining the investment needs to restore the Ukrainian economy, substantiating the reparations for Russia’s aggression against Ukraine, which should include the damage caused after the unleashing of a full-scale war from 24.02.2022 , and losses in the early phases of military aggression (after 22.02.2014).
The author’s method of assessing the market value is based on the CVA concept. The war impact on the enterprises market value should be manifested through changes in the effects of exploitation and financing liabilities, which show a differentiated effect from changes in the internal and external business environment of enterprises in wartime. Estimates should be based on the possibility of both negative and positive effects. The main direction of the negative influence is the financing effect, which is due to the action of the external business environment factor. The Kane-Essian argument should be considered in the estimates by calculating normalized effect sizes.
The normalized cumulative war impact equaled 165.1 billion dollars, which corresponds to 44.4% of the total market value of industrial enterprises of Ukraine, estimated for the period 2014–2022. About 14.4% of the total war impact on the market value of Ukraine’s industrial enterprises is attributed to the financing effect. Loss assessments can be used to evaluate the investment needs to restore destroyed and damaged business property. To determine the amount of compensation for damage caused by the war, the market value of an enterprise according to the CVA method can be used.
- Keywords
-
JEL Classification (Paper profile tab)G32, H56
-
References50
-
Tables0
-
Figures4
-
- Figure 1. Dynamics of the СVA indicator according to the consolidated balance sheet of Ukrainian industrial enterprises in 2008–2020
- Figure 2. Dynamics of the aggregate market value of Ukrainian industrial enterprises, calculated by the CVA indicator in 2008–2020
- Figure 3. Indicators of formation of the industrial enterprises’ market value in Ukraine in 2008–2020
- Figure 4. Actual and normalized indicators of the effects of the exploitation of liabilities and financing in the formation of the market value of Ukrainian enterprises in 2008–2020
-
- Allison, G. T. (1971). Essence of Decision: Explaining the Cuban Missile Crisis (277 p.). New York, NY: Scott, Foresman and Co.
- Anouar Faiteh & Mohammed Rachid Aasri (2023). Economic value added: The best indicator for measuring value creation or just an illusion? Investment Management and Financial Innovations, 20(1), 138-150.
- Barro, R. J., & Lee, J.-W. (1993). Losers and Winners in Economic Growth (NBER Working Paper No. 4341).
- Barro, R., & Lee, J.-W. (1994). Sources of Economic Growth. Carnegie Rochester Conference Series on Public Policy, 40(1), 1-46.
- Berman, E., Shapiro, J. N., & Felter, J. H. (2011). Can hearts and minds be bought? The economics of counterinsurgency in Iraq. Journal of Political Economy, 119(4), 766-819.
- Bluszcz, J., & Valente, M. (2000). The Economic Costs of Hybrid Wars: The Case of Ukraine.
- Boiarko, I. (2019). Rakhivnytstvo u finansakh pidpryiemstv v umovakh informatsiinoho suspilstva: teoriia, metodolohiia, praktyka [Accounting in the finances of enterprises in the conditions of the information society: theory, methodology, practice] (427 p.). Sumy: Universytetska knyha. (In Ukrainian).
- Boiarko, I. (2022). Metodolohichni aspekty otsinky vplyvu viiny na rynkovu vartist pidpryiemstv Ukrainy [Methodological aspects of assessing the impact of the war on the market value of Ukrainian enterprises]. Development of banking systems of the world in the conditions of globalization of financial markets: Materials of the XVI International Scientific and Practical Conference (pp. 189-191). Cherkasy: Educational and scientific department of LNU named after Ivan Franko.
- Boulding, K. E. (1989). Three Faces of Power (259 p.). London: Sage.
- Boyarko, I. M., & Samusevych, Y. V. (2011). Role of intangible assets in company’s value creation. Actual Problems of Economics, 117(3), 86-94.
- Brychko, M., Bilan, Y., Lyeonov, S., & Streimikiene, D. (2022). Do changes in the business environment and sustainable development really matter for enhancing enterprise development? Sustainable Development.
- Bueno de Mesquita B. (1980). An expected utility theory of international conflict: an exploratory study. American Political Science Review, 74(1), 917-931.
- Bueno de Mesquita, B. (1981). The War Trap (226 p.). New Haven, CT: Yale University Press.
- Bueno de Mesquita, B. (1988). Expected utility theory and the study of international conflict. Journal of Interdisciplinary History, 18(4), 629-652.
- Bueno de Mesquita, B. (1989). The contribution of expected-utility theory to the study of international conflict. In Midlarsky M. I. (Ed.), Handbook of War Studies (pp. 143-169). Michigan: University of Michigan Press.
- Burdekin, R. C. K. (2006). Bondholder Gain from the Annexation of Texas and Implications of the U.S. Bailout. Explorations in Economic History, 43(4), 646-66.
- Burton, J., & Azar, E. A. (1986). International Conflict Resolution: Theory and Practice (159 p.). Brighton, Sussex: Wheatsheaf Books.
- Camska, D., Klecka, J., & Scholleova, H. (2021). Influence of age on selected parameters of insolvent companies. Problems and Perspectives in Management, 19(2), 77-90.
- Dolfsma, W., & Kesting, S. (2013). Interdisciplinary Economics: Kenneth E. Boulding’s. Engagement in the Sciences (632 p.). Abington: Routledge.
- Ferguson, N. (2006). Political Risk and the International Bond Market between the 1848 Revolution and the Outbreak of the First World War. Economic History Review, 59(1), 70-112.
- Fernandez, P. (2002). Valuation and Shareholder Value Creation (631 р.). San Diego, CA: Academic Press.
- Frey, B. S., & Waldenstrom, D. (2004). Markets Work in War: World War II Reflected in the Zurich and Stockholm Bond Markets. Financial History Review, 11(1), 51-67.
- Habib, A. M. (2022). Does the efficiency of working capital management and environmental, social, and governance performance affect a firm’s value? Evidence from the United States. Financial Markets, Institutions and Risks, 6(3), 18-25.
- Hakobyan, N., & Khachatryan, A. (2022). Post-War Anomie in the Field of Management Leadership and Anomie Overcoming Models. Business Ethics and Leadership, 6(2), 94-102.
- Hausken, K. (2016). A Cost-benefit analysis of terrorist attacks. Defence and Peace Economics.
- Hausken, K. (2016). Cost benefit analysis of war. International Journal of Conflict Management, 27(4), 454-469.
- Ho, A. (2014). The economic benefits of war outweigh the costs. The Marshall Society.
- Hrytsenko, L., Boiarko, I., Ryabenkov, O., & Didenko, O. (2019). Assessment of the value loss risk in response to the enterprise’s innovative transformations. Marketing and Management of Innovations, 1, 229-237.
- Ivanov, S. V. (2015). Vplyv zbroinoho konfliktu (viiny, boiovykh dii) na vartist pidpryiemstva: [The impact of armed conflict (war, hostilities) on the value of the enterprise] (175 р.). Donetsk: Vyd-vo Makovetskyi. (In Ukrainian).
- Jong-A-Pin, R. (2009). On the Measurement of Political Instability and Its Impact on Economic Growth. European Journal of Political Economy, 25(1), 15-29.
- Keen, D. (2000). The Political Economy of War. War and Underdevelopment: Volume 1: The Economic and Social Consequences of Conflict. Оxford University Press.
- KSE. (2023). [Za rik povnomasshtabnoi viiny rosiia zavdala zbytkiv infrastrukturi Ukrainy na maizhe $144 bln]. In a year of full-scale war, Russia inflicted losses to the infrastructure of Ukraine amounting to almost $144 billion. (In Ukrainian).
- KSE. (2022). [Zahalna suma priamykh zadokumentovanykh zbytkiv zrosla do $108.3 bln, minimalni potreby u vidnovlenni zruinovanykh aktyviv – $185 bln]. Total direct documented losses increased to $108.3 billion, minimum needs in recovery destroyed assets – $185 billion. (In Ukrainian).
- Markwell, D. (2006). John Maynard Keynes and International Relations: Economic Paths to War and Peace. Oxford: Oxford University Press.
- McGuire, M. C. (1992). The new strategic environment and economic factors in the future of nuclear defense. In W. Isard & C. H. Anderton (Eds), Economics of Arms Reduction and the Peace Process (pp. 143-157). North-Holland, Amsterdam.
- Ministry of Education and Science of Ukraine. (2023). Extended Commentary on the Historical Periodization of the Russian Federation’s Large-Scale Invasion of Ukraine. (In Ukrainian).
- Murdoch, J. C., & Sandler, T. (2004). Civil Wars and Economic Growth: Spatial Dispersion. American Journal of Political Science, 48(1), 138-151.
- Pecquet, G. M., & Thies, C. F. (2010). Texas Treasury Notes and the Mexican-American War: Market Responses to Diplomatic and Battlefield Events. Eastern Economic Journal, 36(1), 88-106.
- Pigou, A. (1921). The Political Economy of War (251 p.). London: Macmillan.
- Robbins, L. (1939). The Economic Causes of War (124 p.). London: Jonathan Cape.
- Schneider, G., & Troeger, V. E. (2006). War and the World Economy: Stock Market Reactions to International Conflicts. Journal of Conflict Resolution, 50(5), 623-45.
- Shkolnyk, I., Frolov, S., Orlov, V., Datsenko, V., & Kozmenko, Y. (2022). The impact of financial digitalization on ensuring the economic security of a country at war: New measurement vectors. Investment Management and Financial Innovations, 19(3), 119-138.
- Šimaitė, G., Keliuotytė-Staniulėnienė, G. (2022). Assessment of the impact of the usage of derivatives on the company’s value. Financial Markets, Institutions and Risks, 6(4), 60-69.
- Thies, C. F., & Baum, C. F. (2020). The Effect of War on Economic Growth. CATO JOURNA.
- Vdovychenko, A., & Lepushynskyi, V. (2002). [Ukrainska ekonomika cherez viinu vtratyla blyzko $100 mlrd. Yaki ruinuvannia koshtuvaly Ukraini naibilshe. Rozrakhunky NBU]. The Ukrainian economy lost about $100 billion due to the war. Which destructions cost Ukraine the most. NBU calculations. (In Ukrainian).
- Virglerova, Z., Addeo, F., & Zapletalikova, E. (2020). Business dynamism in the world economy. Problems and Perspectives in Management, 18(3), 160-169.
- Weidenmier, M. D. (2002). Turning Points in the U.S. Civil War: Views from the Grayback Market. Southern Economic Journal, 68(4), 875-90.
- Weidenmier, M. D., & Oosterlinck, K. (2007). Victory or Repudiation? The Probability of the Southern Confederacy Winning the Civil War (NBER Working Paper No. 13567).
- Weissenrieder, F. (1997). Value Based Management: Economic Value Added or Cash Value Added? (42 p.). Gothenburg Studies in Financial Economics.
- Willard, K. L., Guinnane, T., & Rosen, H. S. (1996). Turning Points in the Civil War: Views from the Greenback Market. American Economic Review, 86(4), 1001-1018.