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Artificial intelligence and stock price crash risk: Evidence from China: A pre-registered study

Author

Listed:
  • Bai, Xiao
  • Zhao, Wenyao
  • Liu, Meng

Abstract

This pre-registered study executes the empirical design approved in the associated pre-registered report (Bai and Zhao, 2025) to investigate the impact of artificial intelligence (AI) investment on stock price crash risk. Using China's “New-generation Artificial Intelligence Polit Zone Policy” as a quasi-natural experiment, we find robust evidence that AI investment significantly increases firms' stock price crash risk, mainly due to reduced information transparency and heightened managerial optimism. The effect is more pronounced for firms with lower levels of information transparency and tighter resource constraints. Furthermore, we also find the policy boosts firm value, suggesting that market optimism may drive short-term valuation gains at the cost of long-term stability. Overall, our findings highlight the unintended downside risks associated with AI investment, emphasizing the importance of transparency and governance in mitigating potential adverse outcomes.

Suggested Citation

  • Bai, Xiao & Zhao, Wenyao & Liu, Meng, 2026. "Artificial intelligence and stock price crash risk: Evidence from China: A pre-registered study," Pacific-Basin Finance Journal, Elsevier, vol. 96(C).
    • Handle: RePEc:eee:pacfin:v:96:y:2026:i:c:s0927538x25003762
    DOI: 10.1016/j.pacfin.2025.103039
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