Biography
Elizabeth has taught and/or presented her research at institutions and conferences in more than 30 countries around the world. Her recent research interests are related to the role of non-financial information, including linguistic measures derived from textual analysis of corporate communications and companies’ ESG scores, in assessing and predicting firm performance. Her studies have been published in the Journal of Accounting Research, the Journal of Financial Economics, Management Science, Review of Accounting Studies, the Harvard Business Review, and other top outlets, and they are widely cited in both the academic literature and in the financial press (The Economist, Fortune, Forbes, Financial Times, etc.). Her consulting activities include financial statement analyses and “red flag reviews” for hedge funds and other institutional investors, research and teaching presentations to investment fund managers, and litigation support for the quantification of economic damages.
Passion
Although Professor Demers majored in accounting, she has always loved the stock market, therefore it is only fitting that Demers researches in the field of empirical capital markets in accounting (i.e., at the intersection of accounting and finance). Broadly speaking, she studies how accounting information feeds into stock prices. Accounting as a discipline is often thought of as bookkeeping, but there’s more to it than that. Accounting is information that is used in making business decisions. Professor Demers analyzes that information and how it relates to stock market related outcomes.
Her current passion relates to ESG (Environmental, Social, and Governance), which measures tend to score the social and environmental costs and benefits of the company’s actions. One of her recent studies examined whether the stock prices of firms with high ESG scores were more resilient during the market meltdown at the start of the pandemic (spoiler: they weren’t). Her research also looks at how a company’s LGBTQ-related diversity and inclusion practices impact corporate innovation and firm performance, and, separately, what factors explain companies’ decisions to voluntarily disclose climate risk related information to the TCFD.
Issues in the research area
Professor Demers, throughout her entire career, has looked at the role of non-financial performance measures as supplements to more traditional financial statement information. For example, in the early days of the internet, the financial statements of intangible asset-laden early stage tech companies offered, at best, an incomplete picture of the firms’ value creation and survival prospects. So, her internet company studies examined the complementary role of web traffic metrics (i.e., non-financial performance measures) in assessing firm performance.
Another element of Professor Demers’ research is analyzing the role of language as a supplementary source of information for the stock market. Demers explains that algorithms originally developed by linguists have been tailored by finance and accounting professionals to be applied to corporate communications to extract linguistic signals of executives’ optimism or pessimism about their firms’ performance and prospects. From the perspective of understanding the firm, assessing its value, predicting its future, etc., the accounting statements are backward looking, whereas value is premised upon future expectations. Accordingly, the financial statements alone are insufficient for assessing the firm’s prospects. Fortunately, language offers a natural supplement. Indeed, a majority of the information that a firm releases is in the form of textual information. Hedge funds now commonly trade on linguistic signals, with corporate announcements released on newswires being automatically fed through proprietary algorithms, triggering trades when optimism, pessimism, or some other linguistic feature exceeds a predetermined threshold. Many executives have grown wise to traders’ use of linguistic analyses, and now modify how they communicate to avoid triggering unwanted activity in their firm’s stock trading.
Professor Demers describes that, in her opinion, the areas of most excitement in her field are to be found at the intersection of using tools and knowledge bases from other disciplines, such as psychology and human information processing, or linguistics and vocal intonations. Demers spends her time blending psychology, sociology, linguistics, and more recently environmental science-based measures of the firm’s performance, and seeing how they are reflected in share prices and/or otherwise affect corporate behavior.
Advice
Follow your passions. It’s what I’m doing, and I have no regrets.
Demers offers a very simple piece of advice, “Follow your passions.” She explained that this is exactly that led her to her current position. When she decided to pursue her PhD, Demers had already obtained her CA (now CPA) and CBV designations, and she was starting to earn a pretty good living. But she was not passionate about her work until she decided to pursue a career in academia. She also applied this same philosophy to her research. Demers was intrigued and keen on exploring the intersections of new areas in order to not only challenge herself, but also others around her to think differently.
