Exporting Uncertainty: The Impact of Brexit on Corporate America

Murillo Campello, Gustavo Cortes, d’Almeida, Fabrício and Gaurav Kankanhalli

Journal of Financial and Quantitative Analysis, 2022, vol. 57, issue 8, 3178-3222

Abstract: We show that the 2016 Brexit Referendum had multifaceted consequences for corporate America, shaping employment, investment, divestitures, R&D, and savings. The unexpected vote outcome led U.S. firms to cut jobs and investment within U.S. borders. Using establishment-level data, we document that these effects were modulated by the reversibility of capital and labor. American-based job destruction was particularly pronounced in industries with less skilled and more unionized workers. U.K.-exposed firms with less redeployable capital and high input-offshoring dependence cut investment the most. Data on the near universe of U.S. establishments also point to measurable, negative effects on establishment turnover (openings and closings). Our results demonstrate how foreign-born political uncertainty is transmitted across international borders, shaping domestic capital formation and labor allocation.

Date: 2022
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Working Paper: Exporting Uncertainty: The Impact of Brexit on Corporate America (2020)
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