Publicação
Iran-Israel-US military conflict: an event study analysis for the defence industry
| Resumo: | We employ an event study methodology to analyse the short-term market effect of the Iran-Israel-US Military Conflict between Iran and Israel on the major worldwide defence firms. This military conflict in the Middle East could potentially lead to an increase in military government spending, introducing higher cash flows for firms in the defence sector due to potential greater sales, particularly in the countries involved. Our findings show a significant short-term increase in stock prices for global defence firms within two days of the military conflict’s outbreak. However, in other time periods, there was no notable impact on the stock market. Our results are robust to support the cash flow mechanism on defence firms. Our analysis of defence listed firms by economic regions provides evidence of positive abnormal returns for Asian firms. This finding evidences the importance of the spillover effect between the regions. Additionally, our research reveals insights into the specific characteristics of firms that serve as value drivers in this geopolitical event. We find that stock markets reward firms with lower leverage ratios, lower liquidity ratios, and those from Asia. |
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| Autores principais: | Sayah, Saliha |
| Assunto: | Abnormal returns Event study Iran-Israel-US military conflict Defence markets |
| Ano: | 2025 |
| País: | Portugal |
| Tipo de documento: | dissertação de mestrado |
| Tipo de acesso: | acesso restrito |
| Instituição associada: | Instituto Politécnico de Bragança |
| Idioma: | inglês |
| Origem: | Biblioteca Digital do IPB |
| Resumo: | We employ an event study methodology to analyse the short-term market effect of the Iran-Israel-US Military Conflict between Iran and Israel on the major worldwide defence firms. This military conflict in the Middle East could potentially lead to an increase in military government spending, introducing higher cash flows for firms in the defence sector due to potential greater sales, particularly in the countries involved. Our findings show a significant short-term increase in stock prices for global defence firms within two days of the military conflict’s outbreak. However, in other time periods, there was no notable impact on the stock market. Our results are robust to support the cash flow mechanism on defence firms. Our analysis of defence listed firms by economic regions provides evidence of positive abnormal returns for Asian firms. This finding evidences the importance of the spillover effect between the regions. Additionally, our research reveals insights into the specific characteristics of firms that serve as value drivers in this geopolitical event. We find that stock markets reward firms with lower leverage ratios, lower liquidity ratios, and those from Asia. |
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