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Evidential Strategies in Financial Statement Analysis: A Corpus Linguistic Text Mining Approach to Bankruptcy Prediction

Author

Listed:
  • Tobias Nießner

    (Faculty of Business and Economics, University of Goettingen, 37073 Goettingen, Germany)

  • Daniel H. Gross

    (Faculty of Philology and History, University of Augsburg, 86135 Augsburg, Germany)

  • Matthias Schumann

    (Faculty of Business and Economics, University of Goettingen, 37073 Goettingen, Germany)

Abstract

The qualitative information of companies’ financial statements provides useful information that can increase the accuracy of bankruptcy prediction models. In this research, a dataset of 924,903 financial statements from 355,704 German companies classified into solvent, financially distressed, and bankrupt companies using the Amadeus database from Bureau van Dijk was examined. The results provide empirical evidence that a corpus linguistic approach implementing evidential strategy analysis towards financial statements helps to distinguish between companies’ financial situations. They show that companies use different approaches and confidence assessments when evaluating their financial statements based on solvency and vary their use of evidential strategies accordingly. This leads to the proposition of a procedure to quantify and generate features based on the analysis of evidential strategies that can be used to improve corporate bankruptcy prediction. The results presented here stem from an interdisciplinary adaptation of linguistic findings and provide future research with another means of analysis in the area of text mining.

Suggested Citation

  • Tobias Nießner & Daniel H. Gross & Matthias Schumann, 2022. "Evidential Strategies in Financial Statement Analysis: A Corpus Linguistic Text Mining Approach to Bankruptcy Prediction," JRFM, MDPI, vol. 15(10), pages 1-15, October.
    • Handle: RePEc:gam:jjrfmx:v:15:y:2022:i:10:p:459-:d:941500
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    References listed on IDEAS

    as
    1. Brian J. Bushee & Ian D. Gow & Daniel J. Taylor, 2018. "Linguistic Complexity in Firm Disclosures: Obfuscation or Information?," Journal of Accounting Research, Wiley Blackwell, vol. 56(1), pages 85-121, March.
    2. Edward I. Altman, 1968. "The Prediction Of Corporate Bankruptcy: A Discriminant Analysis," Journal of Finance, American Finance Association, vol. 23(1), pages 193-194, March.
    3. Edward I. Altman, 1968. "Financial Ratios, Discriminant Analysis And The Prediction Of Corporate Bankruptcy," Journal of Finance, American Finance Association, vol. 23(4), pages 589-609, September.
    4. Stewart Jones, 2017. "Corporate bankruptcy prediction: a high dimensional analysis," Review of Accounting Studies, Springer, vol. 22(3), pages 1366-1422, September.
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