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
Date Written: May 6, 2021
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: Suggested Citation