Working Papers present research work by both Danmarks Nationalbank’s employees and our partners. Working Papers are primarily targeted at professionals and people with an interest in central banking research as well as economics and finance in a broader sense.

Financial stability and financial risks

Working Paper: Predicting distresses using deep learning of text segments in annual reports

We develop a probability-of-default model for Danish corporate firms based on deep learning that employs the managements' statements and auditors' reports of the annual reports in addition to the numerical financial variables. Our results show that the text segments provide a statistically significant enhancement of the prediction accuracy compared to models that do not employ the text segments, in particular for large firms. Our results furthermore show that the auditors' reports contain more relevant information than the managements' statements.