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Algorithmic governance and corporate legal compliance: Mechanisms and Evidence on how artificial intelligence improves the judicial environment

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  • Yang, Dong
  • Tang, Ke
  • Yang, Shubo

Abstract

As intelligent governance accelerates globally, the impact of artificial intelligence (AI) on corporate legal behavior is attracting increasing attention. Using panel data on nonfinancial A-share listed firms in China from 2013 to 2024, this study empirically examines the effect of AI development on corporate litigation risk and explores the underlying mechanisms. Results show that higher levels of AI adoption significantly reduce litigation risk. This finding remains robust after accounting for fixed effects, endogeneity, and a range of robustness checks. Further analysis reveals that AI influences legal risk indirectly by curbing abnormal related-party transactions, improving access to trade credit, and lowering the probability of financial restatements. This study contributes to the literature at the intersection of AI, corporate governance, and legal institutions and provides empirical support for applying digital technologies to build a rules-based corporate environment.

Suggested Citation

  • Yang, Dong & Tang, Ke & Yang, Shubo, 2026. "Algorithmic governance and corporate legal compliance: Mechanisms and Evidence on how artificial intelligence improves the judicial environment," Finance Research Letters, Elsevier, vol. 95(C).
    • Handle: RePEc:eee:finlet:v:95:y:2026:i:c:s1544612326002643
    DOI: 10.1016/j.frl.2026.109733
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