The Global Impact of Brexit Uncertainty

61 Pages Posted: 6 May 2021

See all articles by Tarek A. Hassan

Tarek A. Hassan

Boston University; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Stephan Hollander

Tilburg University - Tilburg School of Economics and Management

Laurence van Lent

Frankfurt School of Finance and Management

Ahmed Tahoun

London Business School

Multiple version iconThere are 4 versions of this paper

Date Written: December 2019

Abstract

Using tools from computational linguistics, we construct new measures of the im-
pact of Brexit on listed rms in the United States and around the world: the share of
discussions in quarterly earnings conference calls on costs, bene ts, and risks associated
with the UK's intention to leave the EU. Using this approach, we identify which rms
expect to gain or lose from Brexit and which are most a ected by Brexit uncertainty.
We then estimate the e ects of these di erent kinds of Brexit exposure on rm-level
outcomes. We nd that concerns about Brexit-related uncertainty extend far beyond
British or even European rms. US and international rms most exposed to Brexit
uncertainty have lost a substantial fraction of their market value and have reduced
hiring and investment. In addition to Brexit uncertainty (the second moment), we nd
that international rms overwhelmingly expect negative direct e ects of Brexit (the
rst moment), should it come to pass. Most prominently, rms expect diculties re-
sulting from regulatory divergence, reduced labor mobility, trade access, and the costs
of adjusting their operations post-Brexit. Consistent with the predictions of canonical
theory, this negative sentiment is recognized and priced in stock markets but has not
yet had signi cant e ects on rm actions.

Keywords: Brexit, uncertainty, sentiment, machine learning, cross-country e ffects

Suggested Citation

Hassan, Tarek Alexander and Hollander, Stephan and van Lent, Laurence and Tahoun, Ahmed, The Global Impact of Brexit Uncertainty (December 2019). TRR 266 Accounting for Transparency Working Paper Series No. 11, Available at SSRN: https://ssrn.com/abstract=3840164

Tarek Alexander Hassan

Boston University ( email )

270 Bay State Road
Boston, MA 02215
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Stephan Hollander

Tilburg University - Tilburg School of Economics and Management ( email )

P.O. Box 90153
Tilburg, DC Noord-Brabant 5000 LE
Netherlands
+31 13 466 8288 (Phone)
+31 13 466 8001 (Fax)

HOME PAGE: http://www.uvt.nl/people/s.hollander

Laurence Van Lent (Contact Author)

Frankfurt School of Finance and Management ( email )

Adickesallee 32-34
Frankfurt am Main, 60322
Germany

HOME PAGE: http://www.laurencevanlent.org

Ahmed Tahoun

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

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