The Opioid Crisis, Employee Health Capital, and Corporate Information Production

European Accounting Review, Forthcoming

55 Pages Posted: 10 Nov 2023

See all articles by Kathy Wang

Kathy Wang

Australian National University (ANU)

Leonard Leye Li

UNSW Sydney

Louise Yi Lu

Australian National University

Mark David Wilson

Australian National University

Date Written: October 8, 2023

Abstract

This study examines the effect of employee health on corporate information production. Utilizing exposure to opioid abuse as the proxy for employee health, we find that firms headquartered in counties of high opioid prescription rate produce significantly less accurate management earnings forecasts. This result is robust to controlling for other dimensions of human capital and to utilizing the effective anti-opioid legislation across states as a plausibly exogenous variation that limits the prescriptions of opioid. The negative effect of opioid abuse is stronger for firms facing higher forecast difficulty, and is mitigated for firms with easier access to opioid treatment, for firms with superior employee welfare policies, and for firms with a corporate social responsibility (CSR) committee. We also show that managers delay earnings announcements and reduce forecast precision amidst high local opioid activity. Finally, we show that investors react less strongly to news in forecasts issued by firms located in high opioid areas, consistent with their recognition of the potential adverse effect of opioid abuse on information production within the firm.

Keywords: Opioid crisis, Management forecasts, Health capital

JEL Classification: G02, J01, J30, M51

Suggested Citation

Wang, Kathy and Li, Leonard Leye and Lu, Louise Yi and Wilson, Mark D., The Opioid Crisis, Employee Health Capital, and Corporate Information Production (October 8, 2023). European Accounting Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=4602184 or http://dx.doi.org/10.2139/ssrn.4602184

Kathy Wang

Australian National University (ANU) ( email )

Canberra, Australian Capital Territory 2601
Australia

Leonard Leye Li (Contact Author)

UNSW Sydney ( email )

Kensington
High St
Sydney, NSW 2052
Australia
0293856930 (Phone)
2052 (Fax)

HOME PAGE: http://https://www.unsw.edu.au/staff/leonard-leye-li

Louise Yi Lu

Australian National University ( email )

Mark D. Wilson

Australian National University ( email )

Canberra, Australian Capital Territory 2601
Australia

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