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

• 成果类型: Article; Early Access
• 署名作者: Morris, Peter; Phalippou, Ludovic; Wu, Betty
• 署名单位: University of Oxford; University of Glasgow
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2023.02923
• 发表日期: 2025
• 关键词: covid-19; care homes; lease; IFRS 16; disclosure; Real effects; leverage; Healthcare

摘要

Once information about leasing and corporate structure is incorporated into the way financial leverage is calculated, highly leveraged care homes are found to have a death rate twice as high as that of non-leveraged care homes before the government provided financial support (i.e., during the first wave). Highly leveraged care homes cut costs more aggressively and experienced the largest drop in cash reserves. Care homes controlled by private equity firms no longer display higher COVID-19 death rates once their significantly higher leverage is controlled for. Our results illustrate the importance of accurately measuring financial flexibility and the negative externalities caused by high leverage.