Jurisdictional Capital and AI Regulation: Evidence from the EU AI Act

Yi Chen, Zhe Wang and Jing Zhou

No 2026/180, IMF Working Papers from International Monetary Fund

Abstract: We study how AI regulation affects firm valuation using the EU Artificial Intelligence Act, the world's first comprehensive AI framework. In an event study around the April 2021 proposal, we find firms combining deeper EU presence with faster AI hiring earned higher announcement returns, suggesting markets value “jurisdictional capital”—experience in the EU regulatory environment helps firms navigate the AI regulation. The effect is stronger for high-risk AI, for firms with stable and concentrated EU presence, or prior compliance experience, unexplained by size, foreign exposure, or lobbying. EU-embedded, AI-expanding firms increase within-firm EU revenue share when peers are less embedded.

Keywords: AI regulation; event study; EU AI Act; jurisdictional capital (search for similar items in EconPapers)
Pages: 71
Date: 2026-08-28
New Economics Papers: this item is included in nep-ain and nep-bec
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