Finance Assignment: An Article Review on Textual Analysis
Question
Task: You are required to source latest article with regards to issues in Accounting and Finance for Managers from business journals, databases or magazines. You are required to work individually and submit your critique/review between 4 – 5 pages (Max 1000 word count) long.
Answer
Loughran, T. and McDonald, B., 2016. Textual analysis in accounting and finance: A survey. Journal of Accounting Research, 54(4), pp.1187-1230.
Article identification
- Title of the article: Textual analysis in accounting and finance: A survey
- Author(s): Loughran, T and McDonald, B
- Title of the journal: Journal of Accounting Research
- Year of publication: 2016
1.0 Introduction
Main topic of discussion
The aforesaid article selected herein finance assignment rightly strike the chord as the field of finance and accounting is quite explored by the quantitative methods but there is little instance of textual analysis. The article shows that textual analysis is a dominant aspect considering elements like statistical language processing, content analysis, information retrieval, and others. The increasing aspect of computing in the finance and accounting spree enhanced the relevance of textual analysis manifold (Loughran & McDonald, 2016). For instance, the online accessibility of various finance and business articles, filings of the Securities and Exchange Commission (SEC), and social media posts provide relevant information of the business finances for the stakeholders to analyse.
Definition of key terms
The article by Loughran & McDonald (2016), also initiates to define terms like ‘readability’ and ‘Fog Index’ which is often used. Readability is the gross understanding that the reader of the texts could extract from the piece of information. Again, the fog index is the determination aspect of the readability of the information presented through textual analysis.
Objectives review
The objective of the article review is to extract suitable information from the article and evaluate its information to be applicable in the real business scenario. The review further strives to utilise the textual analysis by the accounts and finance managers in the business scope of Top Glove Corporation.
2.0 Summary
Scope of the article
Through this article, the reader would come to know the importance of textual analysis. So far in the field of finance and accounting, quantitative analysis gained prominence but in contemporary times, textual analysis is gaining ground. The role of technology has played a vital part in textual analysis as internet searches have accelerated the process. The phenomenon could be traced back to the 1960s when the Wall Street Journal (WSJ) through its writings and various articles propagated the usage of statistical analysing (Loughran & McDonald, 2016). Precisely, textual analysis is an upcoming arena in accounting and finance having the potential to forecast future trends and contemplate effective business decisions.
Main points discussed
The article by Loughran & McDonald (2016), discusses the growing need for textual analysis besides other measures like the quantitative analysis. In contemporary times, the growth of internet technology has facilitated the availability of a range of information for the accounts manager to be textually analysed for contemplating effective business decisions.
Findings
The article shows that information plays a pivotal role in documenting the actions and business potentialities of the firm in the upcoming days (Dekker, 2016). In the contemporary business scenario, it would be effective to have a deep insight into the various texts available to Top Glove to make the analysis more understandable for its stakeholders. Again, the textual analysis would be further processed with statistical relevance to create a better impact.
Conclusion
The article concludes that textual analysis is an important phenomenon in the current scenario providing transparency of the complicated information presented to the Board. It is necessary to include the contents, emotions, management choices for an effective understanding and analysis which would be served through textual analysis.
3.0 Article critique
Through this article, Loughran & McDonald (2016), spreads a strong message that textual analysis is an important benchmark in the financial analysis of the current businesses. The importance of the article lies in its critical analysis providing equilibrium to adjudge the different viewpoints effectively. The phenomenon opens a completely new avenue of financial analysis to be used by the business managers in Top Glove for contemplating effective business decisions. The abstract for the article is clear and specific showcasing the importance of textual analysis alongside quantitative analysis making it simplistic for a layman as well. The strength of the article is the qualitative aspect of the company information, say Top Glove to understand its market potentiality and the sorts of challenges posed in the market (Maynard, 2017).
The piece is written for those willing to have a better understanding of financial reports, so the writing style is quite simplistic to make it understandable across the spectrum. Undoubtedly the article treads into a new territory of textual analysis but seems to possess certain elements that need to be addressed at once. The conventional approach of readability is used in the article which ought to have a meaningful transformation but the article somehow became disillusioned. So I feel in certain cases the authors were not clear what they are trying to convey as it might confuse the readers. The authors were busy exploring the complexity of the information as extracted by the quantitative analysis but could not communicate the matter simplistically to the readers (Warren & Jones, 2018).
Nevertheless, textual analysis has its limitations as sometimes it ought to make the decisions complicated owing to the complicated business scenario which needs to be properly addressed by the managers. It is the weakness of the article that it does not necessarily state whether the textual analysis would be apt for large firms or their smaller counterparts as the latter has little complexity in its business foray. Therefore, there might be serious implications on Top Glove on analysing its textual analysis as the business scenario varies and so does its implication. Irrespective of it, the relevance of textual analysis is quite effective in contemplating effective business decisions alongside the quantitative analysis to be confident on the sorts of business decisions undertaken. It is the perfect time to shift from quantitative analysis to textual analysis as the latter serves as an insight on the matter.
4.0 Conclusion
The article of Loughran & McDonald (2016), opens a broader avenue in terms of financial analysis which was till date a foray of quantitative analysis only. The study points out the significance of information and its statistical implications in highlighting the various sorts of textual relevance that could be used to contemplate an effective business decision for Top Glove Corporation. The importance of textual analysis lies in highlighting the insightful revelations in business that could not have been possible through quantitative analysis. But the article needs more study and facts to understand the complexity level of the business that could be handled by the textual analysis before its application in the contemporary businesses.
Bibliography
Dekker, H., 2016. On the boundaries between intrafirm and interfirm management accounting research. Management Accounting Research, 31(2), pp. 86-99.
Loughran, T. & McDonald, B., 2016. Textual analysis in accounting and finance: A survey. Journal of Accounting Research, 54(4), pp. 1187-1230.
Maynard, J., 2017. Financial accounting, reporting, and analysis. London: Oxford University Press.
Warren, C. & Jones, J., 2018. Corporate financial accounting. London: Cengage Learning.
