Artificial intelligence and financial fraud

Guanglin Sun, Zhencheng Ling, Yanru Li and Chang Xie

Pacific-Basin Finance Journal, 2025, vol. 93, issue C

Abstract: Corporate financial fraud significantly undermines stakeholder interests, weakens market resource allocation, and negatively impacts the healthy development of capital markets. This research leverages data from Chinese A-share listed companies (2013−2023), integrating machine learning techniques and text analysis to construct a firm-level artificial intelligence (AI) metric. Results indicate that advancements in AI technology significantly reduce both the likelihood and severity of financial fraud. This mitigating effect is especially pronounced in firms with separated chairman and CEO roles, those audited by non-Big Four firms, and larger enterprises. Mechanism analysis reveals that AI mitigates financial fraud mainly through enhanced information transparency and strengthened internal control systems. This study provides novel insights for policy-making and corporate practice.

Keywords: Artificial intelligence; Financial fraud; Information transparency; Machine learning (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:93:y:2025:i:c:s0927538x25001672

DOI: 10.1016/j.pacfin.2025.102830

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