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The Impact of the Opioid Crisis on Firm Value and Investment

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  • Simintzi, Elena
  • Ouimet, Paige
  • Ye, Kailei

Abstract

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 effect of instrumented opioid prescriptions and subsequent individual employment outcomes. In turn, this impacts firms as we show a negative relationship between opioid prescriptions and subsequent firm growth. We also show that firms respond to the labor shortage by investing more in technology, substituting capital for labor to mitigate some of the costs otherwise expected due to the decline in labor supply. 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 40 basis point increase in the cumulative abnormal return of the average firm and a 70 basis point increase for firms that are less capital intensive pre-treatment and thus more dependent on labor inputs.

Suggested Citation

  • Simintzi, Elena & Ouimet, Paige & Ye, Kailei, 2019. "The Impact of the Opioid Crisis on Firm Value and Investment," CEPR Discussion Papers 14236, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:14236
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    References listed on IDEAS

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    6. Alan B. Krueger, 2017. "Where Have All the Workers Gone? An Inquiry into the Decline of the U.S. Labor Force Participation Rate," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 48(2 (Fall)), pages 1-87.
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    Cited by:

    1. David Cho & Daniel I. García & Joshua Montes & Alison E. Weingarden, 2021. "Labor Market Effects of the Oxycodone-Heroin Epidemic," Finance and Economics Discussion Series 2021-025, Board of Governors of the Federal Reserve System (U.S.).
    2. Jia, Jing & Li, Zhongtian, 2022. "Opioid abuse and corporate social responsibility," Finance Research Letters, Elsevier, vol. 49(C).

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