A1790
Title: Opioid crisis and firm downside tail risks: Evidence from the option market
Authors: Weiming Zhang - IE Business School (Spain) [presenting]
Abstract: The aim is to explore how opioid crisis exposure affects firm downside tail risks implied from equity options. Using a large sample of public firms from 1999 to 2020, firms headquartered in regions with higher opioid death rates face higher downside tail risks, as evidenced by higher costs of protection against left tail risks. The effects are reversed following exogenous anti-opioid legislation, supporting a causal interpretation. Further analysis shows that the opioid crisis heightens firm risk by lowering labor productivity. Greater impact is documented among firms with greater reliance on labor, limited local labor supply, and lower workplace safety.
