ChatGPT for Textual Analysis? How to Use Generative LLMs in Accounting Research

Generative large language models (GLLMs), such as ChatGPT and GPT-4 by OpenAI, are emerging as powerful tools for textual analysis tasks in accounting research. GLLMs can solve any textual analysis task solvable using nongenerative methods as well as tasks previously only solvable using human coding. Whereas GLLMs are new and powerful, they also come with limitations and present new challenges that require care and due diligence. This paper highlights the applications of GLLMs for accounting research and compares them with existing methods. It also provides a framework on how to effectively use GLLMs by addressing key considerations, such as model selection, prompt engineering, and ensuring construct validity.…