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
Date Written: December 31, 2018
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: Suggested Citation