Sanctions are supranational institutions that disrupt firms’ cross-border business operations. They change the rules and norms that govern firms’ global operations. We propose that such interruption of national, multilateral, or supranational institutions affects all multinational firms—not only those incorporated in the sanctions’ target or source countries through different types of exposures (i.e., source, target, third country). Further, we show that the effect of sanctions is contingent on the context in which they unfold. We test our hypotheses on stock-market reactions to sanctions announced after Russia’s invasion of Ukraine. Our results indicate that sanctions negatively affect firms with exposure to the target country, or if a broad coalition of countries announces the sanctions. Firms without a target or source exposure appear to benefit from market capture and experience positive abnormal returns.
