How Deadly Is Financial Leverage? Evidence from Care Homes during the COVID-19 Crisis
99 Pages Posted: 9 Feb 2022 Last revised: 13 Oct 2024
Date Written: January 25, 2022
Abstract
Once information about leasing and corporate structure is incorporated into the way financial leverage is calculated, care homes controlled by private equity firms no longer display higher COVID-19 death rates. Death rates become strongly related instead to financial leverage. Highly levered care home groups have a death rate twice as high as that of unlevered care home groups before the government provided financial support (i.e., during the first wave), and afterwards death rates are similar. Highly levered care home groups cut costs more aggressively and experienced the largest drop in cash reserves. Our results illustrate the importance of accurately measuring financial flexibility.
Note:
Funding: None to declare.
Declaration of Interests: None to declare.
Suggested Citation: Suggested Citation