Automated text mining process for corporate risk analysis and management

Ming-Fu Hsu (), Chingho Chang () and Jhih‐Hong Zeng ()
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Ming-Fu Hsu: National United University
Chingho Chang: National Chi Nan University
Jhih‐Hong Zeng: Chinese Culture University

Risk Management, 2022, vol. 24, issue 4, No 5, 386-419

Abstract: Abstract The aim of this research is to introduce innovative automated text mining process to extract operation risks from accounting narratives and to further examine the association between these risk types and operating performance. Specifically, we perform topic modeling to decompose a large amount of unstructured textual disclosures into some topics and preserve these topics, which are relevant to business operation risk. Sequentially, we propose a measure for the degree of financial default, referred to as the “intensity of risk-word list,” by joint utilization of text mining and a statistical approach. The analyzed results are then fed into a support vector machine-based model to construct the forecasting model. The results show that the textual-based risk indicators are significantly and positively related to a corporate’s operation efficiency. This study also echoes the recent trend of financial reporting regulations to add a new section on risk factors in annual reports.

Keywords: Automated text mining process; Multiple attribute decision-making; Risk management; Annual reports (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (3)

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DOI: 10.1057/s41283-022-00099-6

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