Firm Finances and the Spread of COVID-19: Evidence from Nursing Homes

Abstract

We find that firms’ financial resources play an important role in mitigating the spread of COVID-19. We study nursing homes – whose residents account for over one-third of all U.S. COVID-19 deaths – at a time when investment in risk mitigation was costly and critical. We find that facilities with less liquidity and those experiencing more severe cash flow shocks had a higher likelihood of COVID-19 reaching residents. These patterns are strongest for financially constrained facilities. We also find higher rates of transmission between staff and residents within liquidity-constrained facilities, which is consistent with these facilities creating a less-effective barrier between groups.

Keywords: COVID-19, financial constraints, stakeholder welfare

JEL Classification: G00, G30, I1, I10