Opioid Crisis Effects on Local Firms' Risk

Sabri Boubaker, Z. Ftiti, Y. Liu and W. Louhichi

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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. \textcopyright 2023, The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature.

Keywords: Financial flexibility; Firm risk; Opioid crisis; Payout policy (search for similar items in EconPapers)
Date: 2023
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Published in Review of Quantitative Finance and Accounting, 2023, ⟨10.1007/s11156-023-01208-6⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04434026

DOI: 10.1007/s11156-023-01208-6

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