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The Impact of the Opioid Crisis on Firm Value and Investment

Author

Listed:
  • Paige Ouimet
  • Elena Simintzi
  • Kailei Ye

Abstract

We show a negative effect of opioid prescriptions on subsequent individual employment among employers in our sample using doctor-opioid-prescribing propensity as our instrument. This finding has implications for firms that must now contend with lower local labor supply. We find a negative relationship between opioid prescriptions and subsequent establishment growth. However, firms respond to labor shortages by investing more in technology, replacing the relatively scarcer labor with capital, especially when they are not financially constrained. We find positive abnormal returns, upon the passage of state laws intended to limit opioid prescriptions, that are driven by firms more reliant on labor.

Suggested Citation

  • Paige Ouimet & Elena Simintzi & Kailei Ye, 2025. "The Impact of the Opioid Crisis on Firm Value and Investment," The Review of Financial Studies, Society for Financial Studies, vol. 38(5), pages 1291-1332.
    • Handle: RePEc:oup:rfinst:v:38:y:2025:i:5:p:1291-1332.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhae080
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    More about this item

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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