Fad or Future?: Automated Analysis of Financial Text and Its Implications for Corporate Reporting

Forthcoming in Accounting and Business Research

54 Pages Posted: 12 Jan 2019

See all articles by Craig M. Lewis

Craig M. Lewis

Vanderbilt University - Finance

Steven Young

Lancaster University - Department of Accounting and Finance

Date Written: December 31, 2018

Abstract

This paper describes the current state of natural language processing (NLP) as it applies to corporate reporting. We document dramatic increases in the quantity of verbal content that are an integral part of company reporting packages as well as the evolution of text analytic approaches that are being employed to analyse this content. We provide intuitive descriptions of the leading analytic approaches that are applied in the academic accounting and finance literatures. This discussion includes key word searches and counts, attribute dictionaries, naïve Bayesian classification, cosine similarity, and latent Dirichlet allocation. We also discuss how increasing interest in NLP processing of the corporate reporting package could and should influence financial reporting regulation and note that textual analysis is currently is more of an afterthought, if it is even considered. Opportunities for improving the usefulness of NLP processing are discussed as well as possible impediments.

Keywords: Natural Language Processing, NLP, Review, IASB Disclosure Initiative, Disclosure Problem

JEL Classification: M40, M41

Suggested Citation

Lewis, Craig M. and Young, Steven, Fad or Future?: Automated Analysis of Financial Text and Its Implications for Corporate Reporting (December 31, 2018). Forthcoming in Accounting and Business Research, Available at SSRN: https://ssrn.com/abstract=3309230

Craig M. Lewis

Vanderbilt University - Finance ( email )

401 21st Avenue South
Nashville, TN 37203
United States

Steven Young (Contact Author)

Lancaster University - Department of Accounting and Finance ( email )

The Management School
Lancaster LA1 4YX
United Kingdom
+441 5245-94242 (Phone)
+441 5248-47321 (Fax)

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