Exporting Uncertainty: The Impact of Brexit on Corporate America

Journal of Financial and Quantitative Analysis (JFQA)

80 Pages Posted: 30 Nov 2017 Last revised: 11 May 2021

See all articles by Murillo Campello

Murillo Campello

Cornell University - Samuel Curtis Johnson Graduate School of Management; National Bureau of Economic Research (NBER)

Gustavo Cortes

Warrington College of Business, University of Florida

Fabricio d'Almeida

Purdue University - Krannert School of Management

Gaurav Kankanhalli

University of Pittsburgh - Katz Graduate School of Business

Date Written: May 6, 2021

Abstract

We show that the 2016 Brexit Referendum had multi-faceted consequences for corporate America, shaping employment, investment, divestitures, R&D, and savings. The unexpected vote outcome led US firms to cut jobs and investment within US 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. UK-exposed firms with less redeployable capital and high input-offshoring dependence cut investment the most. Data on the near-universe of US 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.

Keywords: Brexit, Political Uncertainty, International Spillovers, Investment, Labor

JEL Classification: F23, G15, G31

Suggested Citation

Campello, Murillo and Cortes, Gustavo and d'Almeida, Fabricio and Kankanhalli, Gaurav, Exporting Uncertainty: The Impact of Brexit on Corporate America (May 6, 2021). Journal of Financial and Quantitative Analysis (JFQA), Available at SSRN: https://ssrn.com/abstract=3078220

Murillo Campello (Contact Author)

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

114 East Avenue
369 Sage Hall
Ithaca, NY 14853
United States

HOME PAGE: http://www.johnson.cornell.edu/Faculty-And-Research/Profile.aspx?id=mnc35

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138

Gustavo Cortes

Warrington College of Business, University of Florida ( email )

P.O. Box 117168
Gainesville, FL 32611
United States

HOME PAGE: http://warrington.ufl.edu/directory/person/9136/

Fabricio D'Almeida

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States

Gaurav Kankanhalli

University of Pittsburgh - Katz Graduate School of Business ( email )

Pittsburgh, PA 15260
United States

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