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

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.