Date of Completion


Embargo Period



R&D, Affordable Care Act, Medical Devices, Viatical Settlement, Life Settlement, Cost of Capital

Major Advisor

Joseph Golec

Associate Advisor

Carmelo Giaccotto

Associate Advisor

Rexford Santerre

Associate Advisor

Gim Seow

Field of Study

Business Administration


Doctor of Philosophy

Open Access

Open Access


This dissertation consists of three essays examining issues related to life insurance and healthcare finance. In the first essay, we examine how R&D spending is influenced by prior year cash flow and corporate market value using a panel data set of medical device companies over the period 1962 to 2008. We show that the recently enacted excise tax on medical devices will reduce R&D spending by approximately $4 billion leading to a minimum loss of $20 billion worth of human lives.

In the second essay, we use the repeated sales regression method to construct an index of viatical/life settlement returns from 1993:Q4 to 2009:Q4. While these settlements outperform the S&P 500 by 2.04% annually, they display nearly twice the volatility. We find that the large return combined with low correlations and a lack of systematic risk exposure make viatical/life settlements extremely attractive investments when included in a well-diversified portfolio, particularly during times of economic crisis or downturn.

In the third essay, we build upon Ang and Liu (2004) to develop a term structure of the aggregate cost of capital for the medical device industry from 1963 to 2008. Using the term structure of cost of capital to value a 30-year $1.00 annuity we find a maximum valuation error of 37.46% and 53.66% when using the single period CAPM or Fama-French Three Factor model respectively. We find a positive relation between our term structure spread and R&D intensity as well as equity issuance within the medical device manufacturing industry.