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Review of Financial Studies Vol. 36 No. 9 2023

How to Talk When a Machine Is Listening: Corporate Disclosure in the Age of AI

Sean Cao1; Wei Jiang2; Baozhong Yang3; Alan Zhang4

1 University of Maryland, Robert H. Smith School of Business, USA · 2 Emory University Goizueta Business School, , USA · 3 Georgia State University J. Mack Robinson College of Business, , USA · 4 Florida International University College of Business, , USA

Abstract

Growing AI readership (proxied for by machine downloads and ownership by AI-equipped investors) motivates firms to prepare filings friendlier to machine processing and to mitigate linguistic tones that are unfavorably perceived by algorithms. Loughran and McDonald (2011) and BERT available since 2018 serve as event studies supporting attribution of the decrease in the measured negative sentiment to increased machine readership. This relationship is stronger among firms with higher benefits to (e.g., external financing needs) or lower cost (e.g., litigation risk) of sentiment management. This is the first study exploring the feedback effect on corporate disclosure in response to technology.

DOI
10.1093/rfs/hhad021
Volume
36
Issue
9
Pages
3603-3642
Language
en
Sources
bibtex:phds-export.bib crossref openalex

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