Dr. Veenstra is a Chartered Professional Accountant (Ontario) and a CFA charter holder. He earned his CA/CMA designations while working in the audit practice at Ernst & Young LLP (Kitchener). Subsequent to leaving Ernst & Young LLP, he worked in the internal audit department at Wal-Mart Canada and in the corporate accounting department at Canadian Tire.
Kevin is a member of the American Accounting Association and the Canadian Academic Accounting Association and has delivered numerous workshops and led seminars in accounting.
“Is Sin Always a Sin? The Interaction Effect of Social Norms and Financial Incentives on Market Participants’ Behavior” with Yanju Liu and Hai Lu; Accounting, Organizations and Society 39(4): 289-307.
Synopsis: Using alcohol, tobacco, and gaming consumption data and people’s attitudes toward these sin products to proxy for social norm acceptance levels, we show a strong interaction effect between social norms and financial incentives, which significantly influence the behaviour of market participants. Specifically, institutional investors’ shareholdings and analyst coverage of sin companies increase with the degree of social norm acceptance. The association between shareholdings/coverage and social norm acceptance is less pronounced for firms with higher future expected performance. Our results show that social norms and financial incentives have a powerful interaction effect in determining the behaviour of market participants, suggesting that social norms can be crossed when motive and opportunity exist.
“Managers’ Cost of Equity Capital Estimates: Empirical Evidence” with Stephannie Larocque and Alastair Lawrence
Synopsis: Using actual practice data from U.S. corporate treasury executives, we provide initial evidence of managers’ internal estimates of their firms’ cost of equity capital (COEC) and extrapolate managers’ estimation practices to the broader population of public firms. We find that managers’ COEC estimates are fairly similar across public and private firms and show that, in terms of common practice assumptions, risk premium assumptions have the greatest impact on managers’ average COEC estimates followed by the risk-free rate and then by Beta measurement assumptions. Moreover, managers’ estimates are most correlated with standard CAPM-based estimates and estimates reverse-engineered following Easton (2004) and Gode and Mohanram (2003). Further, COEC estimates formed based on manager’s surveyed estimation practices are positively correlated with realized returns only in the pre-survey period, suggesting that managers set their COEC estimates in a backward-looking manner.
“CEO Implicit Motives: Their Impact on Firm Performance”
Synopsis: Using 6160 annual CEO letters to shareholders for 585 S&P 500 companies from the period 1992 to 2010, this paper examines how CEO implicit motives (need for Achievement, need for Power, and need for Affiliation) impact a firm’s financial performance. The results show that after controlling for firm and year fixed effects, financial performance increases with a CEO’s need for power and decreases with a CEO’s need for achievement; and that the effects of implicit motives are persistent, even three years after being initially measured. The results further suggest that, in addition to characteristics such as functional career track, military experience, and number of external board seats held, implicit motives play a significant role in the determination of what makes each CEO unique. The practical significance of these findings is that firms do not always hire the right CEO. As such, firms would do well to consider CEO implicit motives as part of their corporate governance “best practices”. Institutional and retail investors may be able to use CEO letters as a useful source of information for making investment decisions.
“The Moderating Effect of Cultural Values on the Relationship between Corporate Social Performance and Corporate Financial Performance” with Wei Shi
Synopsis: We investigate the role of national cultural values in influencing the relationship between corporate social performance (CSP) and corporate financial performance (CFP). We focus on three Hofstede cultural value dimensions – individualism, long-term orientation, and indulgence. Individualism emphasizes a social framework in which individuals are expected to pursue their own interests, long-term orientation emphasizes attaching greater importance to the future than to the present, and indulgence concerns the extent to which members in society try to control their desires and impulses. We propose two competing hypotheses to explain the moderating effect of these three cultural value dimensions on the CSP-CFP relationship. Since firms with high (low) CSP tend to have low (high) levels of organizational legitimacy in high (low) individualistic, high (low) indulgent, and short-term (long-term) oriented countries, the cultural value conformity hypothesis suggests that the interactions between CSP and individualism/indulgence should have a negative effect on CFP while the interaction between CSP and long-term orientation should have a positive effect on CFP. In contrast, because high (low) CSP deviates from stakeholders’ expectations and is more likely to draw attention in high (low) individualistic, high (low) indulgent, and short-term (long-term) oriented countries, the cultural value deviation hypothesis suggests that the interactions between CSP and individualism/indulgence should have a positive effect on CFP while the interaction between CSP and long-term orientation should have a negative effect on CFP. Employing a hierarchical linear model and using a data set covering 3,347 firms from 34 different countries and regions, we find negative interactions between CSP and individualism/indulgence and a positive interaction between CSP and long-term orientation, lending support to the cultural value conformity hypothesis.
Kevin is a Chartered Professional Accountant (Ontario) and a CFA charter holder. He earned his CA/CMA designations while working in the audit practice at Ernst & Young LLP (Kitchener). Subsequent to leaving Ernst & Young LLP, he worked in the internal audit department at Wal-Mart Canada and in the corporate accounting department at Canadian Tire.
While at Canadian Tire, his responsibilities and skills included: drafting, editing, and issuance of the corporate accounting policy handbook, project lead on VIE (variable interest entity) accounting standard implementation, project lead on financial instrument fair value accounting standards implementation, and in-house resident knowledge expert for all accounting GAAP issues.
Kevin is a member of the American Accounting Association and the Canadian Academic Accounting Association.