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

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. Facilities with less liquidity and those experiencing more severe cash flow shocks had more cases of COVID-19. The importance of cash flow is further supported by tests exploiting state-level variation in Medicaid reimbursement expansion. Evidence on personal protective equipment supplies suggests a lack of financial resources leads to lower investment in risk mitigation. (JEL G30, G32, I10) Received June 30, 2021; editorial decision September 25, 2022 by Editor Andrew Ellul. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.