2022-04-12
Problem: Companies spend millions every year for legal expenses.
Solution: Machine Learning algorithms can help companies mitigate the risk of lawsuits by allowing us to mine text data, previously untapped sources of information, from various sources such as newspapers, social media, and financial reporting. This presentation showcases two such sources: SEC filings and company reviews from indeed.com.
Companies are more likely to be sued when the word “vie” often appears in their 10-K filing to SEC (the management discussion section), while companies are less likely to be sued when the word “support” often does.
Companies are more likely to be sued when the word “school” often appears in their company reviews, while companies are less likely to be sued when the word “assembly” often does.
## # A tibble: 4 x 4
## term word lawsuit no_lawsuit
## <chr> <chr> <int> <int>
## 1 assembly found 2 14
## 2 assembly not_found 101 212
## 3 school found 26 30
## 4 school not_found 77 196Of 329 SP600 companies, 103 were sued while 226 weren’t.
Of the 103 companies sued, 2 had the word, “assembly”, in their company reviews while 101 didn’t.
Of the 226 companies who didn’t get sued, 14 had the word, “assembly”, in their company reviews while 212 didn’t.
## [1] "It's really just light assembly, no heavy equipment."
## [2] "Tank assembly isn’t as easy as they say, Very picky of seams and bases to demanding of quantity vs a quality Want a lot for little ."
## [3] "Utilized Blueprints and drawings for guiding the assembly of the structures."
## [4] "It is now strictly a warehouse and assembly shop of Chinese manufactured valves."
## [5] "More workers are needed in warehouse and assembly line Less workers upfront Everyone should be treated equally Warehouse needs to be updated to a much bigger space ,need way more docks I didn't want to leave the job because I loved it, but it conflicted with my school schedule and although they were willing to work around it, I just thought focusing on school was more important to me."
## [6] "You will be stuck for trainer which is not available for you as new hire you can get this training for production or assembly, and need to wait forever when you have the trainer available again to show you something else to learn and do or sign you off to be able to do that task ,it takes from 4 months up to 7 months to move on other areas to work and cover due to shortage of trainers and lack of good management, the policy of attendance is horrible using 10 points during a year if you stuck for any reason like accident on the road or have any other family issues will lose the point for calling out and of your points are gone you are done working there !"
## [7] "It was my first time in cable and harness assembly but learned a lot because of the confidence that the company trust me too."
## [8] "I have learn new skills because management let me work in different areas like Testing, Inspection, Labeling, Computer Literate in addition to the Assembly Procedures."
## [9] "Such as wiring, assembly and other similar things."
## [10] "Atms, communicated regularly with bank tellers and managers, organize ATM inventory, communicate regularly with management, train new employees to industry A typical day of work consisted of working on an assembly line and preforming various task.At times, the job required multitasking in order to keep the line moving."
## [11] "I learned a great deal over 20 years especially about test processes and assembly procedures."
## [12] "You had to take one job of the assembly line and stick to it all day whether it was stacking 5-13 pound boxes on pallets or flipping a bottle."
## [13] "The typical day at work was soldering circuit boards and assembly the associated cables to the boards."
## [14] "What I've learned_ Section assembly, disk centering, cartridge assembler, final assembly, Comp/Cal, acc.assembly."
## [15] "It's very dirty on the assembly floor."## [1] "ProsCompensation, Benefits- especially 401K, constant evolution & growthConsMany managers have an old school thought process and flat refusal to change, production floor employees seem to get worked really hard since we have a 24/7 operation"
## [2] "This is a good job for someone fresh out of high school, but I wouldn’t recommend to someone who has a lot of experience."
## [3] "Management is old-school but we're well-compensated."
## [4] "It is ran like a high school."
## [5] "If you are fresh out of school great place to learn."
## [6] "Flexible if you are going to school."
## [7] "Very old school place to work and not progressive within today’s standards of work-life balance/mental health Unfortunately due to the pandemic, we got laid off."
## [8] "Flexible hours and good part-time job if you are going to school."
## [9] "It’s a good starter position with flexibility but it feels like high school ."
## [10] "I enjoyed working here, I was in high school at the time so it was a good experience."
## [11] "There is a very old school style of management here that needs to go out the Window."
## [12] "They really gave me a chance as an apprentice service tech coming right out of school considered I had no field experience at all in HVAC"
## [13] "I went to school while working there for almost 3 years only left to get a job in my field."
## [14] "Would not recommend anyone to work here unless you like middle school drama and team leaders that show favoritism."
## [15] "if you like a not so fast paced environment and a good way to make easy money then this would be a good job for you, But if you’re like me and plan on working and going to school then you would have no time for that simply because there’s 2 shifts and they are both 10hr shifts 5 days a week."## # A tibble: 4 x 4
## term word lawsuit no_lawsuit
## <chr> <chr> <int> <int>
## 1 support found 9 41
## 2 support not_found 94 185
## 3 vie found 18 41
## 4 vie not_found 85 185## [1] "changes in general economic, market and regulatory conditions; the development of an interest rate environment that may adversely affect the Company interest rate spread, other income or cash flow anticipated from the Company operations, investment and/or lending activities; changes in laws and regulations affecting banks, bank holding companies and/or financial holding companies, such as the Dodd-Frank Act and Basel III; technological developments and changes; the ability to continue to introduce competitive new products and services on a timely, cost-effective basis; governmental and public policy changes, including environmental regulation; protection and validity of intellectual property rights; reliance on large customers; and financial resources in the amounts, at the times and on the terms required to support the Company future businesses."
## [2] "These initiatives are designed to support the Company mix enrichment strategies, while also improving our ability to better service customers and handle an increasingly complex product mix."
## [3] "These cash inflows were partially offset by a larger increase in inventory in 2013 compared with 2012 in order to support growth of the business."
## [4] "Our life management team continues to improve service to our agents by increasing marketing support and automating life product processes."
## [5] "General and administrative costs include all corporate, field supervision and administrative functions that support existing operations and provide infrastructure to facilitate our future growth."
## [6] "Instruction and educational support expenses generally contain items of expense directly attributable to educational activities of the University."
## [7] "Our capital requirements relate primarily to new store openings, stock repurchases, facilities and systems to support company growth and working capital requirements."
## [8] "With regard to capital allocation, we are targeting Fiscal 2015 capital expenditures of approximately $150 million, which are prioritized towards new stores and store updates as well as DTC and IT investments to support our growth initiatives."
## [9] "Demand for ATI high performance specialty materials and components is expected to increase in support of the higher build rates for both single aisle and larger, twin aisle aircrafts."
## [10] "We invest our statutory surplus funds and the funds supporting our insurance liabilities in fixed maturity, equity securities and alternative investments."
## [11] "We generate service revenue, which is paid monthly, as a result of providing consumer support programs to some of our customers through our call centers."
## [12] "Our employee headcount increased by 18% primarily as a result of two acquisitions and hiring additional personnel to support increased sales."
## [13] "Our planned capital projects in fiscal 2016 will be focused on the completion of our Gilroy, California distribution facility and continuing the implementation of our information technology projects across the Company that we believe will provide us with increased efficiency and the capacity to continue to support the growth of our customer base."
## [14] "We continue to invest in inventory for new programs and additional production costs for ramp-up activities in support of increasing build rates on several programs and build ahead for the relocation from our largest facilities."
## [15] "Our technology segment had 936 employees as of March 31, 2015, an increase of 57, or 6.5%, from 879 at March 31, 2014, of which 88% of the positions added in the past year relate to sales and technical support personnel."## [1] "We have determined that the entity meets the criteria of a variable interest entity ( VIE )."
## [2] "As of June 30, 2013, following the Assured Settlement Agreement, we reconsolidated the debt associated with the HELOC securitizations, held in a trust or variable interest entity (\"VIE\"), at fair value."
## [3] "Investment in Joint Ventures Properties owned in joint ventures are consolidated if the determination is made that we are the primary beneficiary in a variable interest entity (VIE) or we maintain control of the asset through our voting interest or other rights in the operation of the entity."
## [4] "We evaluate our investments and other contractual arrangements to determine if our interests constitute variable interests in a variable interest entity (\"VIE\") and if we are the primary beneficiary."
## [5] "A variable interest entity ( VIE ) is an entity that lacks one or more of the characteristics of a voting interest entity."
## [6] "Changes in credit spreads generally have the most significant effect on changes in fair value of credit derivatives and FG VIE assets and liabilities."
## [7] "Specifically, the ASU focuses on 1) the variable interest entity, or VIE, evaluation of limited partnerships and similar legal entities, 2) eliminating the presumption that general partners should consolidate a limited partnership, 3) the consolidation analysis of reporting entities that are involved with VIEs, and 4) scope exceptions from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds."
## [8] "48 Table of Contents December 31, 2014 $ in thousands Agency Non-Agency (6) GSE CRT (6) CMBS (7) Comm- ercial Loans (7) Consol- idated VIEs (4)(6) Other (7) Elimin- ations (5) Total Investments 10,091,989 3,494,181 625,424 3,469,835 145,756 3,365,003 43,998 (432,534 ) 20,803,652 Cash and cash equivalents (1) 64,603 41,578 10,154 47,809 164,144 Derivative assets, at fair value (2) 23,183 396 599 24,178"
## [9] "A VIE is an entity having either a total equity investment that is insufficient to finance its activities without additional subordinated financial support or whose equity investors lack the ability to control the entity activities."
## [10] "If it is determined that the Company does not have a controlling interest in a joint venture, either through its financial interest in a variable investment entity (\"VIE\") or in a voting interest entity, the equity method of accounting is used if the company has the ability to exercise significant influence."
## [11] "We consolidate variable interest entities ( VIE ) if we determine that we are the primary beneficiary of the entity."
## [12] "It makes targeted amendments to the current consolidation guidance and ends the deferral granted to investment companies from applying the variable interest entity (VIE) guidance."
## [13] "An entity is referred to as a variable interest entity (\"VIE\") pursuant to accounting guidance for consolidation if it possesses one of the following criteria: (i) it is thinly capitalized, (ii) the residual equity holders do not control the entity, (iii) the equity holders are shielded from the economic losses, (iv) the equity holders do not participate fully in the entity's residual economics, or (v) the entity was established with non-substantive voting interests."
## [14] "The Company determined that the Local Media Management Agreement resulted in Local Media being a variable interest entity ( VIE ) and has consolidated Local Media financial position and results of operations from September 3, 2013."
## [15] "We evaluate our investments in limited liability companies and partnerships to determine whether such entities may be a variable interest entity ( VIE )."## [1] "The variable interest holder who has both of the following has the controlling financial interest and is the primary beneficiary: (1) the power to direct the activities of the VIE that most significantly impact the VIE economic performance and (2) the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE."Three data sources:
legal data: represents federal lawsuits filed in six states in the Northeast Region of the United States in 2015-19. The six states are New Hampshire, New York, Maine, Vermont, Connecticut, Rhode Island. Not included is NDNY.
financial data:
company reviews from indeed.com
| Source/Filter | Sample Size | Observations Removed |
|---|---|---|
| SP600 companies | 602 | |
| Remove holdings companies | 551 | 51 |
| Add SEC filings | 505 | 46 |
| Add market capitalization | 504 | 1 |
| Add company reviews | 329 | 175 |
Elastic Net Regression Model
## # A tibble: 2 x 3
## Prediction lawsuit no_lawsuit
## <chr> <dbl> <dbl>
## 1 lawsuit 63 2
## 2 no_lawsuit 1 140## # A tibble: 2 x 3
## Prediction lawsuit no_lawsuit
## <chr> <dbl> <dbl>
## 1 lawsuit 3 23
## 2 no_lawsuit 1 56
Deep Learning Model
## # A tibble: 2 x 3
## Prediction lawsuit no_lawsuit
## <chr> <dbl> <dbl>
## 1 lawsuit 5 0
## 2 no_lawsuit 0 201## # A tibble: 2 x 3
## Prediction lawsuit no_lawsuit
## <chr> <dbl> <dbl>
## 1 lawsuit 0 4
## 2 no_lawsuit 0 79On the training dataset, the model correctly identified all five companies that are sued and all 201 companies that are not sued. On the testing dataset, the model correctly identified all 79 companies that are not sued. However, it falsely predicted four companies not sued as sued.
No coefficients or direction information available for Deep Learning Model.
To get a sense of direction of influence, see below for a GLM, although less accurate than the deep learning model.
