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Beyond efficiency: The role of AI applications in reducing corporate default risk

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  • Li, Li
  • Ding, Yuanzhu

Abstract

As firms continue to expand investment in artificial intelligence (AI) and integrate AI more deeply into operational and managerial processes, AI applications have become an increasingly salient issue in corporate finance because of their firm-level economic effects. Using data on Chinese A-share listed firms from 2008 to 2024, this study examines how AI applications relate to corporate default risk (CDR). The results show that AI applications significantly reduce CDR. Improvements in innovation efficiency and the alleviation of agency conflicts are identified as the two main channels through which this effect operates. In addition, AI applications are more effective at curbing corporate default risk for firms with more advanced digital transformation and for those operating in regions with stronger information infrastructure. These findings help clarify how firms can better leverage AI technologies to reduce default risk in a more effective and systematic manner.

Suggested Citation

  • Li, Li & Ding, Yuanzhu, 2026. "Beyond efficiency: The role of AI applications in reducing corporate default risk," Finance Research Letters, Elsevier, vol. 99(C).
    • Handle: RePEc:eee:finlet:v:99:y:2026:i:c:s1544612326004757
    DOI: 10.1016/j.frl.2026.109946
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