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Unveiling Themes in 10-K Disclosures: A New Topic Modeling Perspective

Author

Listed:
  • Matthias R. Fengler

    (University of St. Gallen - SEPS: Economics and Political Sciences; Swiss Finance Institute)

  • Minh Tri Phan

    (University of St. Gallen (HSG))

Abstract

We investigate the topics in the Management’s Discussion and Analysis (MD&A) section of 10-K filings. Our approach extracts MD&A topics by clustering words around anchor words that broadly define potential themes. The resulting topics are intelligible, distinct and multi-faceted, shedding light on why classical topic models applied to 10-K filings might lack interpretability. We extract two loading series from the MD&As: topic prevalence and topic sentiment. We find that topic prevalence exhibits significant variation throughout the sample period, while sentiment displays marked heterogeneity across topics. Linking MD&A topics to stock returns, we document non-uniform market perceptions toward the topic sentiment.

Suggested Citation

  • Matthias R. Fengler & Minh Tri Phan, 2024. "Unveiling Themes in 10-K Disclosures: A New Topic Modeling Perspective," Swiss Finance Institute Research Paper Series 24-106, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp24106
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