Using textual analysis in bankruptcy prediction: Evidence from Indian firms under IBC

Identifying and managing credit risk is vital for all lending institutions. Historically, assessed using financial data from published statements. However, research indicates that the ability to detect hardship may be improved by textual analysis of firms’ disclosed records. This study aims establish an association between themes words Management Discussion Analysis (MDA) reports firms corporate failures. The took a sample 57 Indian listed declared bankrupt under Insolvency Bankruptcy Code (IBC) along with matched 55 solvent (matched industry size) period FY2011–2019. first part identifies negative compares them Loughran-McDonald dictionary. Then thematic done identify key MDA significant are validated their corresponding ratios in third step panel logistic regression. Word results show IBC have significantly greater tone (2.21 percent) as against 1.30 percent firms. Thematic manageability, activity performance predicting distress. Financial variables such ownership pattern, promoters’ shares pledged, return on capital employed, asset utilization some sync themes. recommends lenders other stakeholders should look beyond statements which ‘window dressed’ qualitative disclosures annual forewarn impending Acknowledgments infrastructural support provided FORE School Management, New Delhi completing this paper gratefully acknowledged.