companies
Abstract:
The use of Artificial Intelligence (AI) in corporate governance is becoming increasingly common in the business world. While there is extensive research on the benefits of AI in corporate governance, little is known about how its implementation affects the market reaction. This study aims to fill this gap by examining the impact of AI adoption on market reaction using an event study approach. We analyzed data from 60 or more companies listed on the New York Stock Exchange (NYSE) that recently announced AI adoption in their corporate governance. The study expects to find that implementing AI in corporate governance leads to a positive market reaction. This is because AI adoption in corporate governance is perceived as a signal of a firm’s technological sophistication, efficiency, and ability to optimize its operations, leading to higher financial performance. This study contributes to the literature on AI in corporate governance by providing evidence of the market’s perception of its impact on firms’ financial performance and providing insights for managers on the benefits of AI adoption in their corporate governance practices.
Implication Contribution:
The results of this study provide insights into the benefits of AI adoption in corporate governance practices. It highlights the importance of firms’ ability to integrate new technologies into their operations to enhance their overall performance. Furthermore, the study offers evidence of the market’s positive perception of AI adoption, which can encourage firms to invest in these technologies to enhance their competitiveness. Additionally, this study contributes to the literature on AI in corporate governance, providing evidence of its impact on firms’ financial performance.
Methodology:
The study uses an event study approach to examine the impact of AI adoption in corporate governance on market reaction. The event study methodology is a statistical technique used to analyze the impact of a specific event, such as a company announcement, on stock prices. The study used a sample of 60 or more companies listed on the New York Stock Exchange (NYSE) that recently announced AI adoption in their corporate governance. The study used daily stock price data, and the event window was set at five days before and five days after the announcement.
Variables:
The independent variable in this study is the announcement of AI adoption in corporate governance. The dependent variable is the market reaction, measured as abnormal stock returns. Control variables include market trends, industry trends, and the firm’s financial performance.
Hypothesized Research Questions:
1. Does the adoption of AI in corporate governance practices have a positive impact on the market reaction?
2. How long does the positive market reaction last after the announcement of AI adoption in corporate governance?
3. Are there any differences in the market reaction to AI adoption in corporate governance based on industry or firm size?