Journal of Financial Markets Vol. 79 2026

Can news predict firm bankruptcy?

Siyu Bie^1,2; Guanhao Feng¹; Naixin Guo¹; Jingyu He¹

¹ City University of Hong Kong · ² East China Normal University

Abstract

We examine whether real-time business news predicts firm bankruptcy. Using full-text daily articles from the Dow Jones Newswires database, we generate firm-level predictors with ChatGPT and benchmark against FinBERT and dictionary-based models. ChatGPT-based variables outperform alternatives, with sentiment scores showing predictive power across horizons. Full-text news significantly enhance predictive accuracy over headlines. News-based measures add explanatory power beyond financial variables. Finally, we show that news captures timely information on macroeconomic conditions relevant to bankruptcy prediction, such as VIX, real GDP growth, and recession probability.

DOI

10.1016/j.finmar.2025.101002

Volume

79

Pages

101002

Language

en

Sources

crossref openalex

Cite

APA 7 MLA 9 Chicago (author–date) Harvard Elsevier Harvard (JFE, JBF…) The Accounting Review Academy of Management American Marketing Association INFORMS (Management Science) Copy citation Copied ✓