David North - Academia.edu (original) (raw)
Papers by David North
Http Dx Doi Org 10 3905 Jpe 2011 14 3 086, May 30, 2011
Pro forma analysis is often performed with the idea that a firm's cash flows are cyclic. Yet, aft... more Pro forma analysis is often performed with the idea that a firm's cash flows are cyclic. Yet, after forecasting cash flows following a cyclic pattern, the remaining cash flows are calculated using a constant growth perpetuity calculation as a "terminal value". Such a calculation for the terminal value is inconsistent with the nature of cyclic cash flows that do not grow at a constant rate. In this paper, a method is developed for calculating the terminal value that incorporates the cyclic nature of cash flows into perpetuity. The method is easily incorporated into Excel and is very amenable to Excel's data table and "spinner" features, as well as monte carlo software packages for extensive sensitivity analysis.
Financial Analysts Journal
We analyzed companies that were the subject of feature (cover) stories in Business Week (weekly),... more We analyzed companies that were the subject of feature (cover) stories in Business Week (weekly), Fortune (biweekly), and Forbes (biweekly) magazines between 1983 and 2002 for stock price performance 24 months prior to and 24 months after (i.e.,
Pensions An International Journal
This study estimates the effect of a Patients' Bill of Rights on the valuation of the DJIA. I... more This study estimates the effect of a Patients' Bill of Rights on the valuation of the DJIA. It examines only the effect on the Dow firms of post-retirement healthcare benefits. Enactment of a Patients' Bill of Rights is estimated to increase the cost of providing healthcare to employees by 4 per cent. If this cost is not passed on to employees, the cost increases will reduce profits and EPS, which will impact stock prices. The impact of a 4 per cent increase in healthcare costs could translate into a reduction in the level of the DJIA of between 410.20 and 838.86 Dow points.
SSRN Electronic Journal, 2000
Regulation S-K requires newly public companies to disclose the most significant risk factors affe... more Regulation S-K requires newly public companies to disclose the most significant risk factors affecting their business in the offering prospectus. We investigate whether these revealed risk factors affect investors by examining their impact on returns. We develop risk measures using word count ratios and the number of named risks as proxies for the risk-related information contained in the prospectus. Using IPO data from 1999-2004, we find a significant relationship between these risk measures, initial returns and ex post measures of return volatility. We use these measures and subsequent IPO returns to test whether firms fully disclose all risks in the offering prospectus. The evidence indicates a lack of full disclosure. Our results support the view that companies make meaningful, but not full disclosures in the offering prospectus, and provide support for the view that the long run average underperformance of IPOs is partly due to the realization of some undisclosed risks.
SSRN Electronic Journal, 2000
Pro forma analysis is often performed with the idea that a firm's cash flows are cyclic. Yet, aft... more Pro forma analysis is often performed with the idea that a firm's cash flows are cyclic. Yet, after forecasting cash flows following a cyclic pattern, the remaining cash flows are calculated using a constant growth perpetuity calculation as a "terminal value". Such a calculation for the terminal value is inconsistent with the nature of cyclic cash flows that do not grow at a constant rate. In this paper, a method is developed for calculating the terminal value that incorporates the cyclic nature of cash flows into perpetuity. The method is easily incorporated into Excel and is very amenable to Excel's data table and "spinner" features, as well as monte carlo software packages for extensive sensitivity analysis. * Indicates the beginning of a new cycle.
The Journal of Wealth Management, 2010
The Engineering Economist, 2008
Sensitivity analysis is a very common exercise performed with the forecasting of project cash flo... more Sensitivity analysis is a very common exercise performed with the forecasting of project cash flows. In this paper, a duration-type measure is generated that provides a single number for the assessment of the project cash flows relative to changes in the discount rate (or adjusted for changes in a particular model parameter). The calculation is no more difficult than the duration measures that already exist for bonds. Yet, the calculation provides valuable insight that many times is lost when performing sensitivity analysis.
Review of Accounting Studies, 2008
The Sarbanes-Oxley Act (SOX) restricted the hiring of accounting and finance officers directly fr... more The Sarbanes-Oxley Act (SOX) restricted the hiring of accounting and finance officers directly from a company's external audit firm, reflecting concerns that such "revolving door" appointments had impaired the quality of audited financial statements. However, it was also argued that companies may have benefited from hiring individuals already familiar with their systems, organization and personnel. To determine how shareholders viewed revolving door appointments, we examine three-day cumulative abnormal returns around the announcements of newly appointed accounting and finance officers. We find that the proportion of revolving door hires is low (only 6.1 percent of all hires in our sample) and that the market valued the revolving door appointments more positively than other appointments. Further tests reveal that the positive market reaction to revolving door appointments is driven mainly by smaller companies, and that revolving door appointments are not associated with higher levels of subsequent discretionary accruals and are negatively related to a company's subsequent receipt of an Accounting and Auditing Enforcement Release (AAER). Overall, the low frequency of occurrence, investors' positive perceptions, and the lack of association with deteriorated reporting quality indicate that the SOX restriction on revolving door appointments may do little to protect shareholders.
Journal of Virology, 2005
In order to test the hypothesis that CD8 ؉ cytotoxic T lymphocytes mediate protection against acu... more In order to test the hypothesis that CD8 ؉ cytotoxic T lymphocytes mediate protection against acute superinfection, we depleted >99% of CD8 ؉ lymphocytes in live attenuated simian immunodeficiency virus macC8 (SIVmacC8) vaccinees from the onset of vaccination, maintained that depletion for 20 days, and then challenged with pathogenic, wild-type SIVmacJ5. Vaccinees received 5 mg per kg of humanized anti-CD8 monoclonal antibody (MAb) 1 h before inoculation, followed by the same dose again on days 3, 7, 10, 13, and 17. On day 13, peripheral CD8 ؉ T lymphocytes were >99% depleted in three out of four anti-CD8 MAb-treated vaccinees. At this time attenuated SIVmacC8 viral RNA loads in anti-CD8 MAb-treated vaccinees were significantly higher than control vaccinees treated contemporaneously with nonspecific human immunoglobulin. Lymphoid tissue CD8 ؉ T lymphocyte depletion was >99% in three out of four anti-CD8 MAb-treated vaccinees on the day of wild-type SIVmacJ5 challenge. All four control vaccinees and three out of four anti-CD8 MAb-treated vaccinees were protected against detectable superinfection with wild-type SIVmacJ5. Although superinfection with wild-type SIVmacJ5 was detected at postmortem in a single anti-CD8 MAb-treated vaccinee, this did not correlate with the degree of preceding CD8 ؉ T lymphocyte depletion. Clearance of attenuated SIVmacC8 viremia coincided with recovery of normal CD8 ؉ T lymphocyte counts between days 48 and 76. These results support the view that cytotoxic T lymphocytes are important for host-mediated control of SIV primary viremia but do not indicate a central role in protection against acute superinfection conferred by inoculation with live attenuated SIV.
Financial Management, 2010
Newly public companies must disclose significant risk factors in the offering prospectus. These d... more Newly public companies must disclose significant risk factors in the offering prospectus. These disclosures are examples of "soft" or ambiguous information. Ambiguity models predict that investors will alter their portfolio weights and react to subsequent signals about such information. We test for these effects in a sample of 1,398 IPOs using word count ratios between soft and hard information as measures of ambiguity. We find a significant relationship between the soft information on risk and both initial and ex post measures of returns. These results support the view that soft information embeds ambiguity and that it influences investors' portfolio choices.
Financial Analysts Journal, 2007
We analyzed companies that were the subject of feature (cover) stories in Business Week (weekly),... more We analyzed companies that were the subject of feature (cover) stories in Business Week (weekly), Fortune (biweekly), and Forbes (biweekly) magazines between 1983 and 2002 for stock price performance 24 months prior to and 24 months after (i.e.,
The recent passing of the Sarbanes-Oxley Act of 2002 resulted in restrictions being placed on the... more The recent passing of the Sarbanes-Oxley Act of 2002 resulted in restrictions being placed on the so-called “revolving door,” where a company hires a senior financial reporting executive directly from its external audit firm. This legislative action, despite a lack of empirical research into the practice, reflects concerns about possible impairment of auditor independence through the hiring of personnel from the company's external auditor. Our study examines a sample of firms where financial reporting executives such as the CFO, VP-Finance, or Controller were hired by a public company directly from their external audit firm. Our results indicate that earnings management, in the form of increased accounting accruals, is no greater immediately before or after hiring in the companies engaging in this hiring practice compared to three separate control groups hiring individuals from other sources or retaining their incumbent financial reporting executives. We also find that changes ...
Http Dx Doi Org 10 3905 Jpe 2011 14 3 086, May 30, 2011
Pro forma analysis is often performed with the idea that a firm's cash flows are cyclic. Yet, aft... more Pro forma analysis is often performed with the idea that a firm's cash flows are cyclic. Yet, after forecasting cash flows following a cyclic pattern, the remaining cash flows are calculated using a constant growth perpetuity calculation as a "terminal value". Such a calculation for the terminal value is inconsistent with the nature of cyclic cash flows that do not grow at a constant rate. In this paper, a method is developed for calculating the terminal value that incorporates the cyclic nature of cash flows into perpetuity. The method is easily incorporated into Excel and is very amenable to Excel's data table and "spinner" features, as well as monte carlo software packages for extensive sensitivity analysis.
Financial Analysts Journal
We analyzed companies that were the subject of feature (cover) stories in Business Week (weekly),... more We analyzed companies that were the subject of feature (cover) stories in Business Week (weekly), Fortune (biweekly), and Forbes (biweekly) magazines between 1983 and 2002 for stock price performance 24 months prior to and 24 months after (i.e.,
Pensions An International Journal
This study estimates the effect of a Patients' Bill of Rights on the valuation of the DJIA. I... more This study estimates the effect of a Patients' Bill of Rights on the valuation of the DJIA. It examines only the effect on the Dow firms of post-retirement healthcare benefits. Enactment of a Patients' Bill of Rights is estimated to increase the cost of providing healthcare to employees by 4 per cent. If this cost is not passed on to employees, the cost increases will reduce profits and EPS, which will impact stock prices. The impact of a 4 per cent increase in healthcare costs could translate into a reduction in the level of the DJIA of between 410.20 and 838.86 Dow points.
SSRN Electronic Journal, 2000
Regulation S-K requires newly public companies to disclose the most significant risk factors affe... more Regulation S-K requires newly public companies to disclose the most significant risk factors affecting their business in the offering prospectus. We investigate whether these revealed risk factors affect investors by examining their impact on returns. We develop risk measures using word count ratios and the number of named risks as proxies for the risk-related information contained in the prospectus. Using IPO data from 1999-2004, we find a significant relationship between these risk measures, initial returns and ex post measures of return volatility. We use these measures and subsequent IPO returns to test whether firms fully disclose all risks in the offering prospectus. The evidence indicates a lack of full disclosure. Our results support the view that companies make meaningful, but not full disclosures in the offering prospectus, and provide support for the view that the long run average underperformance of IPOs is partly due to the realization of some undisclosed risks.
SSRN Electronic Journal, 2000
Pro forma analysis is often performed with the idea that a firm's cash flows are cyclic. Yet, aft... more Pro forma analysis is often performed with the idea that a firm's cash flows are cyclic. Yet, after forecasting cash flows following a cyclic pattern, the remaining cash flows are calculated using a constant growth perpetuity calculation as a "terminal value". Such a calculation for the terminal value is inconsistent with the nature of cyclic cash flows that do not grow at a constant rate. In this paper, a method is developed for calculating the terminal value that incorporates the cyclic nature of cash flows into perpetuity. The method is easily incorporated into Excel and is very amenable to Excel's data table and "spinner" features, as well as monte carlo software packages for extensive sensitivity analysis. * Indicates the beginning of a new cycle.
The Journal of Wealth Management, 2010
The Engineering Economist, 2008
Sensitivity analysis is a very common exercise performed with the forecasting of project cash flo... more Sensitivity analysis is a very common exercise performed with the forecasting of project cash flows. In this paper, a duration-type measure is generated that provides a single number for the assessment of the project cash flows relative to changes in the discount rate (or adjusted for changes in a particular model parameter). The calculation is no more difficult than the duration measures that already exist for bonds. Yet, the calculation provides valuable insight that many times is lost when performing sensitivity analysis.
Review of Accounting Studies, 2008
The Sarbanes-Oxley Act (SOX) restricted the hiring of accounting and finance officers directly fr... more The Sarbanes-Oxley Act (SOX) restricted the hiring of accounting and finance officers directly from a company's external audit firm, reflecting concerns that such "revolving door" appointments had impaired the quality of audited financial statements. However, it was also argued that companies may have benefited from hiring individuals already familiar with their systems, organization and personnel. To determine how shareholders viewed revolving door appointments, we examine three-day cumulative abnormal returns around the announcements of newly appointed accounting and finance officers. We find that the proportion of revolving door hires is low (only 6.1 percent of all hires in our sample) and that the market valued the revolving door appointments more positively than other appointments. Further tests reveal that the positive market reaction to revolving door appointments is driven mainly by smaller companies, and that revolving door appointments are not associated with higher levels of subsequent discretionary accruals and are negatively related to a company's subsequent receipt of an Accounting and Auditing Enforcement Release (AAER). Overall, the low frequency of occurrence, investors' positive perceptions, and the lack of association with deteriorated reporting quality indicate that the SOX restriction on revolving door appointments may do little to protect shareholders.
Journal of Virology, 2005
In order to test the hypothesis that CD8 ؉ cytotoxic T lymphocytes mediate protection against acu... more In order to test the hypothesis that CD8 ؉ cytotoxic T lymphocytes mediate protection against acute superinfection, we depleted >99% of CD8 ؉ lymphocytes in live attenuated simian immunodeficiency virus macC8 (SIVmacC8) vaccinees from the onset of vaccination, maintained that depletion for 20 days, and then challenged with pathogenic, wild-type SIVmacJ5. Vaccinees received 5 mg per kg of humanized anti-CD8 monoclonal antibody (MAb) 1 h before inoculation, followed by the same dose again on days 3, 7, 10, 13, and 17. On day 13, peripheral CD8 ؉ T lymphocytes were >99% depleted in three out of four anti-CD8 MAb-treated vaccinees. At this time attenuated SIVmacC8 viral RNA loads in anti-CD8 MAb-treated vaccinees were significantly higher than control vaccinees treated contemporaneously with nonspecific human immunoglobulin. Lymphoid tissue CD8 ؉ T lymphocyte depletion was >99% in three out of four anti-CD8 MAb-treated vaccinees on the day of wild-type SIVmacJ5 challenge. All four control vaccinees and three out of four anti-CD8 MAb-treated vaccinees were protected against detectable superinfection with wild-type SIVmacJ5. Although superinfection with wild-type SIVmacJ5 was detected at postmortem in a single anti-CD8 MAb-treated vaccinee, this did not correlate with the degree of preceding CD8 ؉ T lymphocyte depletion. Clearance of attenuated SIVmacC8 viremia coincided with recovery of normal CD8 ؉ T lymphocyte counts between days 48 and 76. These results support the view that cytotoxic T lymphocytes are important for host-mediated control of SIV primary viremia but do not indicate a central role in protection against acute superinfection conferred by inoculation with live attenuated SIV.
Financial Management, 2010
Newly public companies must disclose significant risk factors in the offering prospectus. These d... more Newly public companies must disclose significant risk factors in the offering prospectus. These disclosures are examples of "soft" or ambiguous information. Ambiguity models predict that investors will alter their portfolio weights and react to subsequent signals about such information. We test for these effects in a sample of 1,398 IPOs using word count ratios between soft and hard information as measures of ambiguity. We find a significant relationship between the soft information on risk and both initial and ex post measures of returns. These results support the view that soft information embeds ambiguity and that it influences investors' portfolio choices.
Financial Analysts Journal, 2007
We analyzed companies that were the subject of feature (cover) stories in Business Week (weekly),... more We analyzed companies that were the subject of feature (cover) stories in Business Week (weekly), Fortune (biweekly), and Forbes (biweekly) magazines between 1983 and 2002 for stock price performance 24 months prior to and 24 months after (i.e.,
The recent passing of the Sarbanes-Oxley Act of 2002 resulted in restrictions being placed on the... more The recent passing of the Sarbanes-Oxley Act of 2002 resulted in restrictions being placed on the so-called “revolving door,” where a company hires a senior financial reporting executive directly from its external audit firm. This legislative action, despite a lack of empirical research into the practice, reflects concerns about possible impairment of auditor independence through the hiring of personnel from the company's external auditor. Our study examines a sample of firms where financial reporting executives such as the CFO, VP-Finance, or Controller were hired by a public company directly from their external audit firm. Our results indicate that earnings management, in the form of increased accounting accruals, is no greater immediately before or after hiring in the companies engaging in this hiring practice compared to three separate control groups hiring individuals from other sources or retaining their incumbent financial reporting executives. We also find that changes ...