What do businesses talk about when they talk about Brexit?
Fascinating new paper by Hassan, @StephanHollan, @L_van_Lent & Tahoun looks at this question by analysing the transcripts of conference calls firms hold when announcing their earnings. drive.google.com/file/d/119I4ka… 1/
Fascinating new paper by Hassan, @StephanHollan, @L_van_Lent & Tahoun looks at this question by analysing the transcripts of conference calls firms hold when announcing their earnings. drive.google.com/file/d/119I4ka… 1/
Using techniques from computational linguistics, paper measures whether firms are positive or negative about Brexit (which the paper calls 'Brexit Sentiment') and how much risk firms face because of Brexit 2/
Average Brexit Sentiment is negative in nearly all countries.
Firms in the UK have the second worst sentiment measure, but Irish firms are the most worried. 3/
Firms in the UK have the second worst sentiment measure, but Irish firms are the most worried. 3/
Why is Sentiment negative?
"We find that firms mostly expect Brexit headwinds from regulatory divergence, reduced labor mobility, limited trade access and heightened uncertainty."
"we find little or no discussion about the major economic benefits touted by the Leave campaign"
"We find that firms mostly expect Brexit headwinds from regulatory divergence, reduced labor mobility, limited trade access and heightened uncertainty."
"we find little or no discussion about the major economic benefits touted by the Leave campaign"
Brexit Risk for UK firms fluctuates over time, but spikes immediately after the referendum and in the run-up to the March 2019 exit date (sample ends at this point) 5/
Do Brexit Risk and Brexit Sentiment matter for firm performance?
Yes and no.
Firms facing higher Risk have reduced hiring and investment consistent with evidence from the Bank of England's Decision Makers Panel that Brexit uncertainty has reduced investment.
Yes and no.
Firms facing higher Risk have reduced hiring and investment consistent with evidence from the Bank of England's Decision Makers Panel that Brexit uncertainty has reduced investment.
Firms with negative Sentiment have seen stock price declines, but no changes in performance (yet).
This means markets expect these firms to perform worse in future because of Brexit.
Conclusion: "to this point, the Brexit vote has mainly acted as an uncertainty shock" End/
This means markets expect these firms to perform worse in future because of Brexit.
Conclusion: "to this point, the Brexit vote has mainly acted as an uncertainty shock" End/
