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

Abstract

Firms face difficult decisions regarding investment in the protection of nonfinancial stakeholders. We find that a firm's financial health plays an important role in mitigating the spread of COVID-19 by studying nursing homes, whose residents have accounted for about 40% of all U.S. COVID-19 deaths. We find that nursing homes with less liquidity (pre-pandemic days-cash-on-hand) had a higher likelihood of COVID-19 reaching patients in their facility. Those experiencing larger negative cash flow shocks also had a much higher likelihood of COVID-19, and the relationship is strongest for financially constrained nursing homes.