Using a Large Language Model for Accounting Topic Classification

71 Pages Posted: 25 Jun 2023

See all articles by Jenna Burke

Jenna Burke

University of Colorado at Denver

Rani Hoitash

Bentley University - Department of Accountancy

Udi Hoitash

Northeastern University - Accounting Group

Summer (Xia) Xiao

Northeastern University - Accounting Group

Date Written: June 2023

Abstract

We fine-tune a large language model to classify accounting topics within financial disclosures. This allows for the efficient and accurate classification of accounting topics in large volumes of out-of-sample unlabeled text. Specifically, our model leverages innovations in supervised machine learning and large language models to overcome the challenges of manually labeling data for this task and outperforms the most prevalent topic classification method in accounting and finance research (LDA). We demonstrate the importance of these innovations with several examples of unlabeled disclosures – custom notes to the financial statements, the MD&A section, and the risk factor section – that can be classified into topics by our model. We find that these disclosures contain meaningful topic-specific information, which was previously difficult to uncover and is predictive of specific accounting outcomes. Researchers and practitioners interested in identifying relevant and consistent information on accounting topics from large volumes of textual data can use our model.

Keywords: Large language model; deep learning; FinBERT; accounting topic; topic classification; textual analysis

JEL Classification: C45, C81, M40, M41

Suggested Citation

Burke, Jenna and Hoitash, Rani and Hoitash, Udi and Xiao, Summer (Xia), Using a Large Language Model for Accounting Topic Classification (June 2023). Northeastern U. D’Amore-McKim School of Business Research Paper No. 4484489, Available at SSRN: https://ssrn.com/abstract=4484489 or http://dx.doi.org/10.2139/ssrn.4484489

Jenna Burke (Contact Author)

University of Colorado at Denver ( email )

Box 173364
1250 14th Street
Denver, CO 80217
United States

Rani Hoitash

Bentley University - Department of Accountancy ( email )

175 Forest Street
Waltham, MA 02452-4705
United States

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

Udi Hoitash

Northeastern University - Accounting Group ( email )

360 Huntington Ave.
Boston, MA 02115
United States
671-373-5839 (Phone)

Summer (Xia) Xiao

Northeastern University - Accounting Group ( email )

360 Huntington Ave.
Boston, MA 02115
United States

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