Does AI bring value to firms? Value relevance of AI disclosures

Tawei Wang and Ju-Chun Yen

Die Unternehmung - Swiss Journal of Business Research and Practice, 2023, vol. 77, issue 2, 134-161

Abstract: This study examines the value relevance of a firm’s artificial intelligence (AI) implementation and its awareness of the related risks. We proxy a firm’s AI implementation by AI-related disclosures and risk factors in 10-K filings to the U.S. Securities and Exchange Commission. Our results show that AI implementation disclosures in 10-K filings are more value relevant than those without AI disclosures. We also find that the disclosed AI-related risk factors are value relevant, suggesting that investors positively value a firm’s AI risk awareness. By further classifying AI risk factors by a topical analysis of the latent Dirichlet allocation, we find that investors value AI-related risk factor disclosures more regarding security and data privacy. Finally, we find that when a firm has better board- or executive-level IT governance, investors place greater value on AI-related risk factor disclosures regarding business operations.

Date: 2023
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DOI: 10.5771/0042-059X-2023-2-134

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Die Unternehmung - Swiss Journal of Business Research and Practice is currently edited by Prof. Dr. Artur Baldauf, Universität Bern, Prof. Dr. Manfred Bruhn, Universität Basel, Prof. Dr. Pascal Gantenbein, Universität Basel (geschäftsführend), Prof. Dr. Markus Gmür, Universität Fribourg, Prof. Dr. Klaus Möller, Universität St. Gallen, Prof. Dr. Günter Müller-Stewens, Universität St. Gallen, Prof. Dr. Dr. h.c. Margit Osterloh, Universität Zürich, Prof. Dr. Dieter Pfaff, Universität Zürich and Prof. Dr. Martin Wallmeier, Universität Fribourg

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