Political Uncertainty Exposure of Individual Companies: The Case of the Brexit Referendum

51 Pages Posted: 22 Dec 2016 Last revised: 21 Dec 2018

See all articles by Paula Hill

Paula Hill

University of Bristol

Adriana Korczak

University of Bristol - School of Economics, Finance and Management

Piotr Korczak

University of Bristol - Department of Finance and Accounting

Date Written: December 20, 2018

Abstract

This paper studies cross-sectional determinants of the exposure of U.K. firms to Brexit, an event which resulted in an unprecedented rise in political uncertainty. We find that internationalization has a moderating effect on Brexit exposure which goes beyond the pure currency translation effect and is consistent with international activities acting as a diversification mechanism for domestic risks. We also provide some indicative evidence that high-growth firms are more affected by Brexit. At the industry level, we show that Financials and firms in the consumer-facing sectors have the highest exposure to Brexit-related uncertainty. Knowledge of the variation in exposure of individual firms and sectors to political uncertainty associated with major political events can assist managers, investors and policymakers in taking remedial actions to limit its impact.

Keywords: Brexit, Political Uncertainty, U.K.

JEL Classification: E65, G14, G18

Suggested Citation

Hill, Paula and Korczak, Adriana and Korczak, Piotr, Political Uncertainty Exposure of Individual Companies: The Case of the Brexit Referendum (December 20, 2018). Available at SSRN: https://ssrn.com/abstract=2888696 or http://dx.doi.org/10.2139/ssrn.2888696

Paula Hill

University of Bristol ( email )

University of Bristol,
Senate House, Tyndall Avenue
Bristol, BS8 ITH
United Kingdom

Adriana Korczak

University of Bristol - School of Economics, Finance and Management ( email )

8 Woodland Road
Bristol, BS8 1TN
United Kingdom
+441173941490 (Phone)

Piotr Korczak (Contact Author)

University of Bristol - Department of Finance and Accounting ( email )

8 Woodland Road
Bristol BS8 1TN
United Kingdom
+44 117 394 1491 (Phone)

HOME PAGE: http://sites.google.com/view/piotrkorczak/home

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