How Deadly Is Financial Leverage? Evidence from Care Homes during the COVID-19 Crisis

64 Pages Posted: 9 Feb 2022

See all articles by Peter Morris

Peter Morris

Independent

Ludovic Phalippou

University of Oxford - Said Business School

Betty H.T. Wu

University of Glasgow Adam Smith Business School

Date Written: January 25, 2022

Abstract

Highly levered care homes have a death rate twice as high as unlevered care homes at the peak of the COVID-19 pandemic. Care homes controlled by private equity firms no longer display significantly higher death rates once controlling for leverage. Leverage matters only once accurately constructed: i) the full ownership structure of each care home needs to be identified; ii) operating leases must be capitalized and added to the balance sheet. These two issues have seldom been tackled in the literature and we show that they matter.

Note:
Funding: None to declare.

Declaration of Interests: None to declare.

Suggested Citation

Morris, Peter and Phalippou, Ludovic and Wu, Betty H.T., How Deadly Is Financial Leverage? Evidence from Care Homes during the COVID-19 Crisis (January 25, 2022). Available at SSRN: https://ssrn.com/abstract=4017507 or http://dx.doi.org/10.2139/ssrn.4017507

Peter Morris

Independent ( email )

Ludovic Phalippou (Contact Author)

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

Betty H.T. Wu

University of Glasgow Adam Smith Business School ( email )

Glasgow, Scotland
United Kingdom

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