The Impact of the Opioid Crisis on Firm Value and Investment

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.