The Impact of the Opioid Crisis on Firm Value and Investment

56 Pages Posted: 11 Mar 2019 Last revised: 19 Nov 2019

See all articles by Paige Ouimet

Paige Ouimet

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School

Elena Simintzi

University of North Carolina Kenan-Flagler Business School; Centre for Economic Policy Research (CEPR)

Kailei Ye

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School

Date Written: November 17, 2019

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.

Keywords: opioid, technological change, firm value

Suggested Citation

Ouimet, Paige and Simintzi, Elena and Ye, Kailei, The Impact of the Opioid Crisis on Firm Value and Investment (November 17, 2019). Available at SSRN: https://ssrn.com/abstract=3338083 or http://dx.doi.org/10.2139/ssrn.3338083

Paige Ouimet (Contact Author)

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States

Elena Simintzi

University of North Carolina Kenan-Flagler Business School ( email )

McColl Building, Room 4200B
300 Kenan Center Drive
Chapel Hill, NC 27599-3490
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Kailei Ye

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
219
Abstract Views
1,062
rank
142,419
PlumX Metrics