The Impact of the Opioid Crisis on Firm Value and Investment
SeriesErasmus Finance Seminars
Speaker(s)Page Ouimet (UNC Kenan Flager Business School, United States)
LocationErasmus University, V-Building, Room VB-56
Date and time
October 29, 2019
15:30 - 16:45
High rates of opioid abuse have had a signiﬁcant impact on the United States including implications for ﬁrms which must now contend with a lower pool of available and productive workers. This paper documents a negative relationship between opioid prescriptions and subsequent ﬁrm growth, after controlling for local economic and demographic conditions. We also show that ﬁrms in high opioid areas are more likely to invest in technology, substituting capital for labor to mitigate some of the costs otherwise expected due to the labor shortages. Moreover, we establish a causal link between opioids and ﬁrm values using the staggered passage of state laws intended to limit opioid prescriptions. Following the passage of these laws, we ﬁnd a 20 basis point increase in the cumulative abnormal return of the average ﬁrm and a 50 basis point increase for ﬁrms that are less capital intensive pre-treatment and thus more dependent on labor inputs.