Opioid crisis effects on local firms’ risk

Sabri Boubaker (), Zied Ftiti (), Yifan Liu () and Wael Louhichi ()
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Sabri Boubaker: EM Normandie Business School, Métis Lab
Zied Ftiti: EDC Paris Business School
Yifan Liu: Texas State University
Wael Louhichi: ESSCA School of Management

Review of Quantitative Finance and Accounting, 2025, vol. 65, issue 1, No 6, 185-217

Abstract: Abstract This study investigates the impact of the opioid crisis on local firms’ risk and payout flexibility using a sample of 4094 U.S. firms headquartered in 542 counties. We find that firms headquartered in counties with higher opioid mortality rates are associated with higher risk than those with lower opioid mortality rates. This association is more prominent for states severely inflicted by opioid abuse and firms with very high risk. Moreover, firms headquartered in counties with higher opioid mortality rates use more flexible payout policies that favor share repurchases over dividends than those in counties with lower opioid mortality rates. Further, opioid abuse increases local firms’ risk by increasing labor costs. Besides, the staggered passage of state opioid laws mitigates the impact of opioid abuse on firm risk and payout flexibility. The above findings suggest that the opioid crisis raises local firms’ risk, and they respond with more flexible payout policies to improve financial flexibility.

Keywords: Opioid crisis; Firm risk; Payout policy; Financial flexibility (search for similar items in EconPapers)
JEL-codes: G32 G35 R11 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s11156-023-01208-6

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