Does artificial intelligence enhance bank profitability? Evidence from China

Zhen Li

Finance Research Letters, 2026, vol. 90, issue C

Abstract: This study investigates how artificial intelligence (AI) adoption affects bank profitability in China. We develop a novel AI lexicon using Large Language Models (LLMs) and construct comprehensive AI adoption indicators from annual reports and patent filings, capturing both strategic orientation and innovation activities. Using a panel of 430 Chinese commercial banks from 2007 to 2022, we find that AI adoption enhances bank profitability. Mechanism tests reveal that AI adoption drives profitability by reducing operational costs, diversifying income sources, and promoting mobile banking development. Moreover, the profitability gains from AI adoption are more pronounced for systemically important banks, banks with concentrated ownership structures, and banks located in regions with mature FinTech ecosystems. Our findings provide novel insights into the value creation of AI in emerging banking markets.

Keywords: Artificial intelligence; AI adoption; Bank profitability; Textual analysis (search for similar items in EconPapers)
JEL-codes: C55 G21 O33 (search for similar items in EconPapers)
Date: 2026
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1544612325026157
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:90:y:2026:i:c:s1544612325026157

DOI: 10.1016/j.frl.2025.109366

Access Statistics for this article

Finance Research Letters is currently edited by R. Gençay

More articles in Finance Research Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().