IDEAS home Printed from https://ideas.repec.org/a/eee/finlet/v85y2025ipds154461232501308x.html

Artificial intelligence and corporate investment efficiency

Author

Listed:
  • Shen, Ling
  • Jin, Yifei
  • Xue, Qinyuan

Abstract

This study examines how a firm's artificial intelligence (AI) level influences its corporate investment efficiency. Using panel data from Chinese A-share listed companies covering the period 2010–2023 and a firm-level AI indicator derived from patent information, we empirically examine this relationship and explore the underlying mechanisms. Our findings indicate the following: (1) A firm's AI level significantly enhances its investment efficiency. This conclusion remains robust across a series of robustness checks. (2) Mechanism analysis indicates that AI primarily enhances investment efficiency by improving internal information processing efficiency. (3) Heterogeneity analysis reveals that the positive effect of AI on investment efficiency is more pronounced in firms with longer listing histories (more mature firms) and in non-state-owned enterprises. This research contributes micro-level evidence regarding the economic consequences of AI from a corporate investment perspective.

Suggested Citation

  • Shen, Ling & Jin, Yifei & Xue, Qinyuan, 2025. "Artificial intelligence and corporate investment efficiency," Finance Research Letters, Elsevier, vol. 85(PD).
    • Handle: RePEc:eee:finlet:v:85:y:2025:i:pd:s154461232501308x
    DOI: 10.1016/j.frl.2025.108050
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S154461232501308X
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.frl.2025.108050?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Biddle, Gary C. & Hilary, Gilles & Verdi, Rodrigo S., 2009. "How does financial reporting quality relate to investment efficiency?," Journal of Accounting and Economics, Elsevier, vol. 48(2-3), pages 112-131, December.
    2. Duan, Yanqing & Edwards, John S. & Dwivedi, Yogesh K, 2019. "Artificial intelligence for decision making in the era of Big Data – evolution, challenges and research agenda," International Journal of Information Management, Elsevier, vol. 48(C), pages 63-71.
    3. Gregory S. Miller & Douglas J. Skinner, 2015. "The Evolving Disclosure Landscape: How Changes in Technology, the Media, and Capital Markets Are Affecting Disclosure," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 53(2), pages 221-239, May.
    4. Shanmuganathan, Manchuna, 2020. "Behavioural finance in an era of artificial intelligence: Longitudinal case study of robo-advisors in investment decisions," Journal of Behavioral and Experimental Finance, Elsevier, vol. 27(C).
    5. Shu-Miao Lai & Chih-Liang Liu & Taychang Wang, 2014. "Increased disclosure and investment efficiency," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 21(3), pages 308-327, September.
    6. Kevin Bauer & Moritz von Zahn & Oliver Hinz, 2023. "Expl(AI)ned: The Impact of Explainable Artificial Intelligence on Users’ Information Processing," Information Systems Research, INFORMS, vol. 34(4), pages 1582-1602, December.
    7. Zhao, Xin & Zhai, Guoqing & Charles, Vincent & Gherman, Tatiana & Lee, Hyoungsuk & Pan, Tuan & Shang, Yuping, 2024. "Enhancing enterprise investment efficiency through artificial intelligence: The role of accounting information transparency," Socio-Economic Planning Sciences, Elsevier, vol. 96(C).
    8. Yang, Yingya & Jin, Yifei & Xue, Qinyuan, 2024. "How does digital transformation affect corporate total factor productivity?," Finance Research Letters, Elsevier, vol. 67(PB).
    9. Scott Richardson, 2006. "Over-investment of free cash flow," Review of Accounting Studies, Springer, vol. 11(2), pages 159-189, September.
    10. Ahsan Habib & Dinithi Ranasinghe & Julia Yonghua Wu & Pallab Kumar Biswas & Fawad Ahmad, 2022. "Real earnings management: A review of the international literature," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(4), pages 4279-4344, December.
    11. Citroen, Charles L., 2011. "The role of information in strategic decision-making," International Journal of Information Management, Elsevier, vol. 31(6), pages 493-501.
    12. Liu, Shu & Wu, Yuting & Yin, Xiaobo & Wu, Bin, 2023. "Digital transformation and labour investment efficiency: Heterogeneity across the enterprise life cycle," Finance Research Letters, Elsevier, vol. 58(PC).
    13. Hasan, Mostafa Monzur & Cheung, Adrian (Wai-Kong), 2018. "Organization capital and firm life cycle," Journal of Corporate Finance, Elsevier, vol. 48(C), pages 556-578.
    14. Hao Liang & Bing Ren & Sunny Li Sun, 2015. "An anatomy of state control in the globalization of state-owned enterprises," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 46(2), pages 223-240, February.
    15. Xue, Qinyuan & Jin, Yifei & Zhang, Cheng, 2024. "ESG rating results and corporate total factor productivity," International Review of Financial Analysis, Elsevier, vol. 95(PA).
    16. Clatworthy, Mark A. & Peel, Michael J., 2016. "The timeliness of UK private company financial reporting: Regulatory and economic influences," The British Accounting Review, Elsevier, vol. 48(3), pages 297-315.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yang, Bo & Hu, Hao & Li, Yixuan, 2026. "Intelligent revolution of educational resources: AI-driven reallocation effects and economic consequences," Finance Research Letters, Elsevier, vol. 93(C).
    2. Xiao, Liang & Zhang, Youtian, 2025. "When do the competitive effects of artificial intelligence investment emerge?," Finance Research Letters, Elsevier, vol. 86(PA).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Toksoz, Tuba & Demirkan, Sebahattin & Demirkan, Irem & Mishra, Birendra K., 2025. "CEO overconfidence across the firm lifecycle: effects on accounting outcomes and stock market reactions," Journal of Contemporary Accounting and Economics, Elsevier, vol. 21(3).
    2. Li, Chengming & Wang, Hanyang & Zhang, Changyun, 2026. "Digital transformation and corporate mergers and acquisitions: Evidence and mechanism in China," Pacific-Basin Finance Journal, Elsevier, vol. 95(C).
    3. Xiao, Shengpeng & Wu, Kedong & Xiao, Xiao & Lin, Changqing, 2025. "How do data assets affect firm investment?," International Review of Financial Analysis, Elsevier, vol. 106(C).
    4. Kałdoński, Michał & Jewartowski, Tomasz, 2025. "Are institutional investors effective monitors in a country where closely held firms predominate? Insights from agency problem-driven dividend payouts," Research in International Business and Finance, Elsevier, vol. 77(PB).
    5. T. K. Ajmal & Vinod Kumar & Balasubramanian G., 2025. "Tax-avoidance Effect on Investment Inefficiency: An Examination of Agency Theory," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 24(1), pages 63-86, March.
    6. Abigail Allen & Melissa F. Lewis‐Western & Kristen Valentine, 2022. "The Innovation and Reporting Consequences of Financial Regulation for Young Life‐Cycle Firms," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 60(1), pages 45-95, March.
    7. Li, Zhanli & Yang, Zichao, 2025. "ESG rating disagreement and corporate Total Factor Productivity: Inference and prediction," Finance Research Letters, Elsevier, vol. 78(C).
    8. Hanbin Lin & Char-Lee Lok & Tingting Xie, 2026. "The Effect of CEO Overconfidence on Overinvestment of Listed Firms in China: The Moderating Role of Board Financial Expertise," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 10(3), pages 2043-2058, March.
    9. Amel Kouaib, 2022. "Corporate Sustainability Disclosure and Investment Efficiency: The Saudi Arabian Context," Sustainability, MDPI, vol. 14(21), pages 1-13, October.
    10. Liu, Wenqiong & Yeh, Chih-Chuan & Zhang, Lingyu & Huang, Ho-Chuan, 2025. "From alignment to crash: How CFO co-option affects stock prices," Finance Research Letters, Elsevier, vol. 82(C).
    11. Li, Pan & Zhong, Yun & Yan, Han, 2026. "The constructive interaction between executive and judicial powers: Government-court coordination and corporate investment efficiency," Journal of Contemporary Accounting and Economics, Elsevier, vol. 22(1).
    12. Rania Missaoui, 2025. "Corporate investment in corrupt environments: the case of the BRICS countries," SN Business & Economics, Springer, vol. 5(10), pages 1-28, October.
    13. Rehana Anwar & Jaleel A. Malik, 2020. "When Does Corporate Social Responsibility Disclosure Affect Investment Efficiency? A New Answer to an Old Question," SAGE Open, , vol. 10(2), pages 21582440209, June.
    14. Xu, Weidong & Luo, Zijun & Li, Donghui, 2024. "Investor–firm interactions and corporate investment efficiency: Evidence from China," Journal of Corporate Finance, Elsevier, vol. 84(C).
    15. Ma, Haiyan & Luo, Guangyi & Li, Yuan & Jing, Huiting, 2026. "Do green bonds boost corporate investment efficiency? Evidence from China’s mandatory bond market," Finance Research Letters, Elsevier, vol. 90(C).
    16. Shu-Miao Lai & Chih-Liang Liu & Taychang Wang, 2014. "Increased disclosure and investment efficiency," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 21(3), pages 308-327, September.
    17. Tian, Zhaoping & Wang, Wei & Tan, Qing & Huang, Xiaolu, 2025. "Perception of economic policy uncertainty and inefficient investment," Finance Research Letters, Elsevier, vol. 86(PE).
    18. Zhao, Xin & Zhai, Guoqing & Charles, Vincent & Gherman, Tatiana & Lee, Hyoungsuk & Pan, Tuan & Shang, Yuping, 2024. "Enhancing enterprise investment efficiency through artificial intelligence: The role of accounting information transparency," Socio-Economic Planning Sciences, Elsevier, vol. 96(C).
    19. Gao, Yihong, 2025. "How do social insurance premiums influence corporate underinvestment? Evidence from an emerging market," Economic Modelling, Elsevier, vol. 149(C).
    20. Thi Huong Dao & Quoc Trung Tran & Thi Bich Nga Vuong & Son Dai Le, 2023. "Female Directors and Investment Efficiency: New Evidence from an Emerging Market," Indian Journal of Corporate Governance, , vol. 16(2), pages 200-217, December.

    More about this item

    Keywords

    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:finlet:v:85:y:2025:i:pd:s154461232501308x. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/frl .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.