How artificial intelligence incidents affect banks and financial services firms? A study of five firms

Authors

Isarin Durongkadej, San Jose State UniversityFollow
Wenyao Hu, New York Institute of Technology
Heng Emily Wang, Elon University

Publication Date

12-1-2024

Document Type

Article

Publication Title

Finance Research Letters

Volume

70

DOI

10.1016/j.frl.2024.106279

Abstract

We investigate the impact of AI incidents on banking and the financial industries. By analyzing five U.S. banks and financial services firms, we find that the average short-term Cumulative Abnormal Returns (CARs) loss of AI incidents is -21.04 % and the negative impact can spread out to the financial industry with a three-day loss of -0.13 %. Compared to firms without AI incidents, banks and financial services firms with AI incidents have higher bankruptcy risk and lower operational cash flows. To our knowledge, this is the first study analyzing the AI incident impact on the performance of banks and financial services firms.

Keywords

Artificial intelligence, Banks, Financial industry

Department

Accounting and Finance

Recommended Citation

Isarin Durongkadej, Wenyao Hu, and Heng Emily Wang. "How artificial intelligence incidents affect banks and financial services firms? A study of five firms" Finance Research Letters (2024). https://doi.org/10.1016/j.frl.2024.106279