Textual Analysis in Accounting: What’s Next?

70 Pages Posted: 3 Mar 2022 Last revised: 7 Sep 2022

See all articles by Khrystyna Bochkay

Khrystyna Bochkay

University of Miami Herbert Business School

Stephen V. Brown

University of Connecticut - Department of Accounting

Andrew J. Leone

Northwestern University

Jenny Wu Tucker

University of Florida - Warrington College of Business

Date Written: September 7, 2022

Abstract

Natural language is a key form of communication in the capital markets. Textual analysis is the application of Natural Language Processing (NLP) to textual data for automated information extraction or measurement. We survey publications in top accounting journals and describe the trend and current state of textual analysis in accounting. We organize available NLP methods in a unified framework. Accounting researchers have often used textual analysis to measure disclosure sentiment, readability, and disclosure quantity; to compare disclosures to determine similarities or differences; to identify forward-looking information; and to detect themes. For each of these tasks, we explain the conventional approach and newer approaches, which are based on machine learning, especially deep learning. We discuss how to establish the construct validity of text-based measures and the typical decisions researchers face in implementing NLP models. Finally, we discuss opportunities for future research. We conclude that (1) textual analysis has grown as an important research method and (2) accounting researchers should increase their knowledge and use of machine learning, especially deep learning, for textual analysis.

Keywords: Textual analysis, machine learning, deep learning, textual data, content analysis, text analysis.

JEL Classification: M4, M2, G3

Suggested Citation

Bochkay, Khrystyna and Brown, Stephen V. and Leone, Andrew J. and Tucker, Jenny Wu, Textual Analysis in Accounting: What’s Next? (September 7, 2022). Contemporary Accounting Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=4029950 or http://dx.doi.org/10.2139/ssrn.4029950

Khrystyna Bochkay

University of Miami Herbert Business School ( email )

5250 University Drive
Coral Gables, FL 33146-6531
United States

Stephen V. Brown

University of Connecticut - Department of Accounting ( email )

School of Business
Storrs, CT 06269-2041
United States

HOME PAGE: http://www.stephenvbrown.com/

Andrew J. Leone

Northwestern University ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

Jenny Wu Tucker (Contact Author)

University of Florida - Warrington College of Business ( email )

Gainesville, FL 32611
United States
352-273-0214 (Phone)
352-392-7962 (Fax)

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