Deglobalization and debt pricing: A Difference-in-Difference Regression-Based Analysis of Brexit's Influence on British Corporate Bond Performance

This paper examines how deglobalization affects private investment for companies in anti-globalization countries by focusing on analyzing the impacts of Brexit on British companies' corporate bond investment, typically bonds issued on the US bond market from 2010 to 2020. This provides a new perspective based on micro-level data instead of macro-level information to analyze the effect of Brexit on British firms which shows clean causal implications of the negative impacts of Brexit on the UK's economy. The research applies difference-in-difference (DID) regression models with panel ordinary least squares (OLS) using mathematically statistical linear regression analysis to determine the differential changes in British and American firms' bond yield spread and issuance amount after the Brexit referendum on June 23, 2016. The model is further optimized by adding controlled variables and a cluster-robust variance-covariance estimator. The results show that after the referendum, bonds offered by British companies are experiencing greater yield spread and less issuance amount. This indicates that Brexit has caused a relatively negative impact on British firms by reducing investors' confidence to invest in British firms' corporate bond securities.