N°23-16: International Firm Performance and Proximity to Rare Disaster Risk

Treating the Russian invasion of Ukraine as a rare disaster event and defining proximity as both physical distance and political closeness, we analyze investors’ response to disaster risk by examining the performance of commercial real estate investments in countries of proximity to the event. We find that proximity to the war matters, but the impact of the disaster is not uniform across different property types. Firms with green and less obsolete properties are less likely to experience negative abnormal returns. Our findings highlight the differences in equity risk premia even within the same industry facing the same disaster. We also find support for the eminence of reducing reliance on brown fuel.