By Tom Westbrook

SYDNEY (Reuters) – A public inquiry into mistreatment of the elderly in Australia’s A$20 billion ($14 billion) aged-care industry begins hearings on Friday, with investors expecting damaging testimony to be followed by tighter regulation and a possible sector shakeout.

The powerful Royal Commission, called after a slew of reports of assaults on patients, predatory pricing and poor care, will be similar to the inquiry that exposed widespread wrongdoing in Australia’s financial sector last year.

Shares in the four largest listed operators, Aveo Group, Estia Health Ltd, Japara Healthcare Ltd and Regis Healthcare Ltd, previously seen as an attractive exposure to Australia’s aging population, have plunged since the inquiry was announced last September.

They have each shed at least a fifth of their value, wiping almost A$1 billion from their cumulative market capitalization. Unlisted players, such as Bupa Aged Care Holdings Pty Ltd, the country’s largest aged care operator by market share, have also been the subject of upsetting revelations and are in damage control.

“It gives an opportunity to shine a national policy spotlight on aged care that is fairly rare,” said Ian Yates, chief executive of Council on the Aging Australia, a lobby group representing seniors, said by phone from Canberra.

Public pressure for an inquiry began in 2017 after media reported dementia patients were being bound in restraints, overdosed on medication and neglected at a since-closed home for the elderly in South Australia.

The inquiry’s precise focus, within a broad remit to investigate the quality of services and how best to provide them, is not clear, though commissioners Richard Tracey and Lynelle Briggs are expected to provide extra detail on Friday.

Bupa said the inquiry is an opportunity to review the sector. Estia and Aveo had no comment on Wednesday. None of the other firms replied to a request for comment on Wednesday, though Estia, Regis and Aveo have welcomed the inquiry.

All could probably expect their margins to shrink by the time the inquiry winds up, IBISWorld analyst Hayley Munro-Smith said.

“We expect the Royal Commission to focus on staffing numbers and qualifications,” she said, adding it was likely to recommend minimum staff-to-resident ratios.

“That would of course increase labor expenses and put pressure on profit margins.”

It could also lead to tightening of government subsidies, another pressure point that would probably contribute to consolidation in an industry where the largest player has a market share of just 3.6 percent, she said.

The independent quasi-judicial inquiry is due to provide an interim report by Oct. 31 and a final report before the end of April 2020.

(Reporting by Tom Westbrook; Editing by Stephen Coates)