Working Paper: NBER ID: w26609
Authors: Tarek Alexander Hassan; Stephan Hollander; Laurence Van Lent; Ahmed Tahoun
Abstract: We propose a text-based method for measuring and analyzing the international propagation of uncertainty shocks at the firm level. We apply this method to estimate the impact of Brexit-related uncertainty and find widespread reverberations on listed firms in 81 countries. International firms most exposed to Brexit uncertainty not only significantly lost market value but also reduced hiring and investments. In addition to Brexit uncertainty (the second moment), we find that international firms overwhelmingly expected negative direct effects from Brexit (the first moment). Most prominently, firms expected difficulties from regulatory divergence, reduced labor mobility, and limited trade access.
Keywords: Brexit; Uncertainty; International Firms; Investment; Hiring
JEL Codes: D8; E22; E24; E32; E6; F0; G18; G32; G38; H32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Brexit uncertainty (F69) | significant losses in market value (G33) |
| Brexit uncertainty (F69) | reduced hiring (J63) |
| Brexit uncertainty (F69) | reduced investment (G31) |
| Brexit uncertainty (F69) | negative direct effects (regulatory divergence, limited trade access) (F69) |
| negative direct effects (regulatory divergence, limited trade access) (F69) | reduced hiring (J63) |
| negative direct effects (regulatory divergence, limited trade access) (F69) | reduced investment (G31) |
| Brexit uncertainty (F69) | firm-level outcomes (L21) |
| Brexit vote (F69) | uncertainty shock (D89) |