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Exporting Uncertainty: The Impact of Brexit on Corporate America

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  • Campello, Murillo
  • Cortes, Gustavo S.
  • d’Almeida, Fabrício
  • Kankanhalli, Gaurav

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.

Suggested Citation

  • Campello, Murillo & Cortes, Gustavo S. & d’Almeida, Fabrício & Kankanhalli, Gaurav, 2022. "Exporting Uncertainty: The Impact of Brexit on Corporate America," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 57(8), pages 3178-3222, December.
    • Handle: RePEc:cup:jfinqa:v:57:y:2022:i:8:p:3178-3222_10
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    References listed on IDEAS

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    Cited by:

    1. Doriana Cucinelli & Vincenzo Farina & Paola Schwizer & Maria Gaia Soana, 2021. "Better the Devil You Know: The Impact of Brexit Political Uncertainty on European Financial Markets," International Journal of Business and Management, Canadian Center of Science and Education, vol. 15(6), pages 1-62, July.
    2. Schmitz, Emerson, 2019. "Essays on banking and international trade," Other publications TiSEM 74748bf6-7c16-4e08-a6a6-e, Tilburg University, School of Economics and Management.
    3. Emerson Erik Schmitz, 2019. "The impact of Brexit uncertainties on international trade : Evidence from Belgium," Working Paper Research 380, National Bank of Belgium.
    4. Paul Cousins & Marie Dutordoir & Benn Lawson & João Quariguasi Frota Neto, 2020. "Shareholder Wealth Effects of Modern Slavery Regulation," Management Science, INFORMS, vol. 66(11), pages 5265-5289, November.

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    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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