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LexPredict Co-Founders Research 10-K Reports

“…Regulatory exposure and complexity have been increasing in the recent past.”

So begins the thesis from our very own Michael J. Bommarito II and Daniel Martin Katz in their new paper. “Measuring the Temperature and Diversity of the US Regulatory Ecosystem” confronts this reality of regulatory complexity. Their research uses attested empirical data – most notably, the “10-K” annual reports filed by companies registered with the SEC. The 10-K reports are the perfect balance of optimism and realism, argue Bommarito and Katz. On the one hand, the SEC requires companies to disclose these reports. On the other hand, the honest assessment provided by these reports affords companies the opportunity to confront realities in the market and simultaneously offer solutions that can benefit their operations. Given these observations, Bommarito and Katz state, 10-K annual reports provide comprehensive and realistic views of firms and their environmental factors.

They gathered data over 20 years, from 34,000 companies and 160,000 10-K reports. With this data, they applied machine learning and natural language processing to track all citations of federal laws. What they found is that the regulatory exposure of firms has grown immensely over the past twenty years. Beyond mere guesswork and anecdotal evidence, Bommarito and Katz have empirically shown that the regulatory burden has increased since 1995. In addition, these firms have become more diverse and complex from a regulatory perspective.

For more information on this paper, click here.

CEO Michael J. Bommarito II is also Head of Research at the Law Lab at Chicago-Kent College of Law (Illinois Institute of Technology). CSO Daniel Martin Katz is Associate Professor of Law at the Chicago-Kent College of Law (Illinois Institute of Technology).