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How artificial intelligence incidents affect banks and financial services firms? A study of five firms

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  • Durongkadej, Isarin
  • Hu, Wenyao
  • Wang, Heng Emily

Abstract

We investigate the impact of AI incidents on banking and the financial industries. By analyzing five U.S. banks and financial services firms, we find that the average short-term Cumulative Abnormal Returns (CARs) loss of AI incidents is -21.04 % and the negative impact can spread out to the financial industry with a three-day loss of -0.13 %. Compared to firms without AI incidents, banks and financial services firms with AI incidents have higher bankruptcy risk and lower operational cash flows. To our knowledge, this is the first study analyzing the AI incident impact on the performance of banks and financial services firms.

Suggested Citation

  • Durongkadej, Isarin & Hu, Wenyao & Wang, Heng Emily, 2024. "How artificial intelligence incidents affect banks and financial services firms? A study of five firms," Finance Research Letters, Elsevier, vol. 70(C).
    • Handle: RePEc:eee:finlet:v:70:y:2024:i:c:s1544612324013084
    DOI: 10.1016/j.frl.2024.106279
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    Cited by:

    1. Li, Zhen, 2026. "Does artificial intelligence enhance bank profitability? Evidence from China," Finance Research Letters, Elsevier, vol. 90(C).
    2. Zhang, Yang & Jiang, Manru, 2026. "Digital marketing, social media sentiment, and corporate cash flow," Finance Research Letters, Elsevier, vol. 92(C).
    3. Ma, Yuan & Zhang, Wenchao & Ma, Chengxiang & Ai, Yudong & Hu, Jun, 2025. "Artificial intelligence, data elements, digital economy, and corporate innovation performance," International Review of Economics & Finance, Elsevier, vol. 103(C).
    4. Zhou, Huilin & Wang, Linhui & Cao, Yutong & Li, Jincheng, 2025. "The impact of artificial intelligence on labor market: A study based on bibliometric analysis," Journal of Asian Economics, Elsevier, vol. 98(C).
    5. Wang, Jying-Nan & Liu, Hung-Chun & Hsu, Yuan-Teng, 2025. "Do AI incidents and hazards matter for AI-themed cryptocurrency returns?," Finance Research Letters, Elsevier, vol. 74(C).
    6. Deng, Xiaomeng & Qin, Chuan, 2026. "Artificial intelligence and corporate financialization," International Review of Financial Analysis, Elsevier, vol. 110(C).
    7. Shi, Yu & Wu, Tong & Qin, Chuan & Liu, Bailu, 2025. "The value-creating potential of AI: A multi-dimensional analysis of effects and mechanisms," International Review of Financial Analysis, Elsevier, vol. 108(PB).

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    Keywords

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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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