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How artificial intelligence improves corporate governance: Evidence from the ERNIE large model

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  • Yang, Jingxuan

Abstract

This paper innovatively employs the ERNIE large language model to construct a firm-level Artificial Intelligence Index (AI_index) to measure the extent of corporate adoption of Artificial Intelligence (AI) technologies. Building on this index, we conduct an empirical analysis using data on Chinese listed companies to examine the impact of AI application on corporate governance. The findings reveal three key results: (1) AI adoption significantly improves corporate governance, and this result remains robust after a series of validation tests; (2) Mechanism analyses suggest that AI enhances corporate governance primarily through two channels—reducing agency costs and mitigating information asymmetry; (3) Heterogeneity tests indicate that the governance-enhancing effect of AI is more pronounced in non-state-owned enterprises. Overall, this study provides novel empirical evidence on the role of AI in shaping corporate governance.

Suggested Citation

  • Yang, Jingxuan, 2026. "How artificial intelligence improves corporate governance: Evidence from the ERNIE large model," Finance Research Letters, Elsevier, vol. 96(C).
    • Handle: RePEc:eee:finlet:v:96:y:2026:i:c:s1544612326003120
    DOI: 10.1016/j.frl.2026.109782
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