Durham Rutgers Accounting Analytics Network (DRAAN) Webinar

The Session:

We develop and test a model of high quality annual report discourse. The model is trained and evaluated on annual reports published between 2007 and 2018 by London Stock Exchange-listed firms shortlisted for an award by corporate reporting experts. We use methods from computational linguistics to identify discourse features that distinguish quality according to what management say (i.e.: content) and how they say it (i.e.: language structure). Our final model comprises 10 features that characterise high quality reporting including more strategy-related commentary, less focus on growth, and greater language accessibility that promotes cognitive processing (evidenced by more relevancy markers, greater connectivity, more exclusive forms of language, and fewer grammatical words). Out-of-sample tests reveal predictive accuracy rates of around 70%. The methods for identifying discourse properties are transferrable to many other settings including fraud detection, predicting internal control weaknesses and audit qualifications, and identifying takeover targets. The paper explaining the analysis is more detail is available here.

The Speaker:

Steven Young is Professor of Accounting and Interim Deputy Dean at Lancaster University Management School. His research interests cover topics at the interface between accounting and corporate finance including executive remuneration, narrative reporting and natural language processing, and financial reporting quality. His industry research collaborations include the Financial Conduct Authority, the Financial Reporting Council, the CFA Society UK, and the Pensions and Lifetime Savings Association. His research features in leading academic journals including The Accounting Review, Review of Accounting Studies, and Accounting, Organizations and Society. He is Associate Editor for Journal of Business Finance and Accounting and an editorial board member for a range of journals including Accounting, Organizations and Society and Accounting and Business Research.

Professor Steven Young Webpage

17:00 UK time (12:00 EST)