Phone (switch): +61 2 9850 7800
Fax: +61 2 9850 9019
E-mail: Guy.Ford@mgsm.edu.au
“A man who seeks advice about his actions will not be grateful for the suggestion that he maximise expected utility.” (A. D. Roy, 1952)
BCom (UNSW), MBus (App Fin) UTS, PhD (UWS), SA Fin, FAAFM
I have published refereed research papers in domestic and international journals and presented my work at a number of domestic and international conferences.
I am a founding co-editor of the Journal of Law and Financial Management and have co-authored/edited two books, Financial Markets and Institutions in Australia (Prentice Hall) and Readings in Financial Institutions Management (Allen and Unwin). I have also worked on a number of research grants for the Securities Industry Research Centre of the Asia Pacific (SIRCA).
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Timeline & C.V.
Recent Publications
2008
Journal Articles
Carlin T. M., Finch N. & Ford G., “Fair Value Impairment Testing Under IFRS: Examining Australia’s Disclosure Quality”, Financial Reporting, Regulation and Governance, 7, 1, 1-25
Conference Papers
Finch, N., Carlin, T. M., Ford G., “Insights Into Profit Quality Through Goodwill Impairment Disclosures – An Australian Case Study”, 20th Asian Pacific Conference on International Accounting, Paris, France, 09 – 12 November.
Finch, N., Carlin, T. M., Doherty, C., & Ford G., “An examination of the practice of goodwill disclosure among Australian firms during 2007”, 20th Asian Pacific Conference on International
Working Papers
Ford, G. & Young, M., “Towards an Understanding of Adequate Capitalisation Levels for a Bank” MGSM Working Papers, WP 2008-4
Ford, G & Young, M., “Congruent Risk Measures in a Banking Firm”, MGSM Working Papers, WP 2008-3
2007
Refereed Journals
Carlin T. M., Finch N., & Ford G., “Are All Audits Born Equal?”, JARAF - The Journal of Applied Research in Accounting and Finance, vol. 2, issue 1, pp. 21 - 32.
Ford, G. and Sundmacher, M., “Bank Credit Rating Dynamics”, International Review of Business Research Papers, vol. 3, no. 4, , pp. 44-62.
Conference Papers
Carlin T. M., Finch N., & Ford G., “Goodwill Impairment - An Assessment of Disclosure Quality and Compliance Levels by Large Listed Australian Firms”, (AFAANZ) Accounting and Finance Association of Australia and New Zealand Limited, Gold Coast, Australia, July, 2007
Carlin T. M., Finch N., & Ford G., “When Inconvenient Observation Meets Comfortable Myth – A Fresh Look at Audit Quality”, (APIRA) The Fifth Asia Pacific Interdisciplinary Research in Accounting Conference, Auckland, New Zealand, July 2007.
Petty, R. M., Cuganesan S., Finch N., & Ford G., “Challenges for Firms in Disclosing the Value of their Intellectual Capital”, Academy of Accounting and Financial Studies, Annual International Conference, Jacksonville, USA, April, 2007.
Cuganesan S., Ford G., & Finch N., “Balanced Scorecards for Strategy Implementation: Perspectives from the Recruitment Industry”, International Management Accounting Conference, Kuala Lumpur, Malaysia, 15 – 17 August.
Ford, G. and Sundmacher, M., “Bank Credit Rating Dynamics”, 5th International Business Research Conference, Dubai, April 2007.
Carlin, T., Finch, N. and Ford, G., “Two Cases in Independent Assessment of Impairment Testing Robustness”, The 9th International Decision Sciences Institute Conference, Thailand
Working Papers
Carlin T. M., Finch N., & Ford G., “Goodwill Impairment - An Assessment of Disclosure Quality and Compliance Levels by Large Listed Australian Firms”, MGSM WP 2007-xx.
Carlin T. M., Finch N., & Ford G., “Goodwill Impairment - An Assessment of Disclosure Quality and Compliance Levels by Large Listed Australian Firms”, MGSM WP 2007-8.
Carlin T. M., Finch N., & Ford G., “When Inconvenient Observation Meets Comfortable Myth – A Fresh Look at Audit Quality” MGSM WP 2007-9
Carlin T. M., Finch N., & Ford G., “An Examination of Disclosure Quality of Goodwill Impairment Testing in a Post - IFRS Environment – A Stakeholder Perspective” SSRN, http://ssrn.com/abstract=1031840
Carlin T. M., Finch N., & Ford G., “Transpacific Industries - A Case Study in Profit Quality Through the Examination of Impairment Disclosures” MGSM Working Paper Series, WP 2009-1.
Projects & Partnerships
Doctoral Students
Principal Supervisor for:
- Dan BEGLEY
- Dean BLOMSON
- Stephen CROUCH
- Nigel GARROW
- Khairil KHAIRI
- Nur Hidayah LAILI
- Tabatha PETTITT
- Cuong Duc PHAM
- Maike SUNDMACHER
- Manh Dung TRAN
- Mark YOUNG
Courses
Accounting for Management
An introduction is provided to Financial Accounting, Management Accounting and the analysis of the Financial Accounting statements, the Profit and Loss Statement, the Balance Sheet and the Statement of Cash Flows. The unit aims to equip managers with the ability to analyse and interpret financial data, and use their knowledge for projecting and assessing the performance of organizations and business units.
Financial Management
The fundamentals of financial management are introduced from the perspective of the finance manager in a firm, namely those making investment, financing and dividend decisions. Finance theory is applied with the aim of providing a coherent framework and insights to assist in forming reasoned judgements. Case studies and financial planning models are used to provide context. The unit covers methods used in evaluating investment projects and an introduction is given to the local debt and equity markets.
Corporate acquisitions
This unit examines the various forms of corporate combinations and the motivations for corporate acquisitions, accounting, tax and legal issues associated with corporate acquisitions in Australia. The pricing and financing of acquisitions, corporate restructuring and integration issues are also examined.
Insolvency and Restructuring
This unit will broadly cover a range of topics including: domestic and international insolvency governance; financial distress prediction techniques; valuation of distressed claims as assets; the role of liquidation and administration; company valuation and corporate leveraged restructuring; post-loss investment and financing; contingent leverage strategies; and hybrid debt.
Special topic in Management: Strategic Finance
This unit aims to bridge the divide between corporate finance and corporate strategy, using game theory and real options analysis. Game theory offers a systematic, structured approach to analysing strategic decision-making when there are situations of interdependence between the firm and its competitors. Real options analysis provides an investment evaluation tool that incorporates the value of flexibility and growth opportunities in an uncertain environment where competitors can affect each other’s behaviour.
Miscellaneous
MONTE CARLO ‘STIMULATION’
Why my risk appetite is not fulfilled
How often do you go to sleep at night feeling secure in the knowledge that the project proposal put before you earlier in the day carries a healthy positive net present value (NPV)? Textbooks tell us we should sleep well because the positive NPV signals we can expect to earn a return on the investment that not only covers our cost of capital, but also provides something extra for our shareholders.
Well I don’t sleep very soundly.
Recently I was presented with a proposal that had a positive NPV of around $3 million. I asked the group that put it together to comment on the risk of the project. “It’s captured in the hurdle rate” I was told. True – the cost of capital that was used to value the project did use a hurdle rate that embodied the beta of the project and hence its market risk.
I was not comforted, however. Does this mean that should the project fail and lose a considerable sum of money shareholders won’t be concerned because they typically hold a diversified portfolio of investments across many firms? Will they rejoice in the knowledge that large losses on this project should be offset by unexpected gains in projects in other firms in which they hold an interest? I think not.
I asked the group to conduct a thorough assessment of the project risk. I was presented with detailed sensitivity, scenario and breakeven analysis. The sensitivity analysis showed the impact of one-off changes in key variables, while the scenario analysis showed the subjective probabilities that had been attached to various cash flow levels in order to arrive at the expected present value of the project. The accounting breakeven showed how many sales we’d need to achieve to cover our fixed costs, while the finance breakeven showed the sales we would need to achieve in order to earn our cost of capital.
I felt like I had dined out at an exclusive restaurant, yet still felt hungry. My appetite for an understanding of the risk of the project had not been satisfied.
‘What if the shortage of skilled technicians escalates?’ I asked. ‘We’ll give that a 10% weight, change the cash flows, and adjust the other probabilities’ they said. I felt even hungrier. ‘What is the likelihood of prices changing but nothing else changing, such as our market share or working capital requirements?’ This is what their sensitivity analysis essentially assumed. ‘If the project was failing, would not we consider restructuring or abandonment?’
Their models were unable to deal with these important questions.
The good news is we have a saviour - Monte Carlo Simulation (MCS). MCS allows both a realistic range for each of the key variables (based on management input) and the shape of the distribution for each of the variables (costs rarely fall and are thus likely to be skewed, for example) to be incorporated into the risk assessment. MCS also allows correlations across variables to be specified and captured. In only seconds we can run 5,000 or more simulations on the project NPV, based on random draws for each of the variables. At the conclusion of the simulation we receive the distribution for the project NPV, statistical measures of project volatility and identification of the variables that contribute most to variability in project returns – all gold for managers wanting greater insight into project risk.
MCS is not something new – surprisingly it has been around for over 30 years. Despite its longevity it seems not to be popular with managers, with surveys showing that only a small proportion systematically incorporate it in their risk assessments. Perhaps this reflects perceptions of complexity, mistrust of computer simulations or scepticism over statistical output.
If there is any doubt over the usefulness of MCS, let me tell you the results of a simulation run on the project referred to earlier. A project with a positive NPV of $3million had a one-in-three chance of failing (negative NPV). The largest contributors to volatility were fixed costs in years two and three. The group took notice. Here perhaps is where the greatest strength of MCS lies – communicating complex notions of risk in a meaningful and intuitive way.
Guy Ford is an Associate Professor in Finance and Director of the Centre for Managerial Risk at the Macquarie Graduate School of Management. He is also a habitual Monte-Carlo Simulator.
