The Global Impact of Brexit Uncertainty

Tarek Hassan, Laurence van Lent (), Stephan Hollander () and Ahmed Tahoun ()
Additional contact information
Laurence van Lent: Frankfurt School of Finance and Management
Stephan Hollander: Tilburg University
Ahmed Tahoun: London Business School

No 106, Working Papers Series from Institute for New Economic Thinking

Abstract: Using tools from computational linguistics, we construct new measures of the impact of Brexit on listed firms in the United States and around the world; these measures are based on the proportion of discussions in quarterly earnings conference calls on the costs, benefits, and risks associated with the UK’s intention to leave the EU. We identify which firms expect to gain or lose from Brexit and which are most affected by Brexit uncertainty. We then estimate effects of the different types of Brexit exposure on firm-level outcomes. We find that the impact of Brexit- related uncertainty extends far beyond British or even European firms; US and international firms most exposed to Brexit uncertainty lost a substantial fraction of their market value and have also reduced hiring and investment. In addition to Brexit uncertainty (the second moment), we find that international firms overwhelmingly expect negative direct effects from Brexit (the first moment) should it come to pass. Most prominently, firms expect difficulties from regulatory divergence, reduced labor mobility, limited trade access, and the costs of post-Brexit operational adjustments. Consistent with the predictions of canonical theory, this negative sentiment is recognized and priced in stock markets but has not yet significantly affected firm actions.

Keywords: Brexit; uncertainty; sentiment; machine learning; cross-country effects (search for similar items in EconPapers)
JEL-codes: D8 E22 E24 E32 E6 F0 G18 G32 G38 H32 (search for similar items in EconPapers)
Pages: 62 pages
Date: 2020-01
New Economics Papers: this item is included in nep-big, nep-cmp, nep-eec, nep-int and nep-mac
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Citations: View citations in EconPapers (25)

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Related works:
Journal Article: The Global Impact of Brexit Uncertainty (2024)
Working Paper: The Global Impact of Brexit Uncertainty (2020)
Working Paper: The Global Impact of Brexit Uncertainty (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:thk:wpaper:106

DOI: 10.36687/inetwp106

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