IDEAS home Printed from https://ideas.repec.org/a/eee/finana/v96y2024ipbs1057521924007051.html
   My bibliography  Save this article

Artificial intelligence, dynamic capabilities, and corporate financial asset allocation

Author

Listed:
  • Li, Yu
  • Zhong, Huiyi
  • Tong, Qiye

Abstract

The integration of artificial intelligence (AI) into corporate operations has revolutionized financial decision-making processes, yet our understanding of how AI adoption specifically impacts financial asset allocation remains limited. While existing research has explored AI's role in various financial applications, there is a critical gap in empirically examining the relationship between AI adoption and corporate financial asset allocation, particularly in understanding the organizational capabilities that enable firms to effectively leverage AI technologies. This study investigates this relationship using panel data from 25,811 firm-year observations of Chinese A-share listed companies (2008–2022). Through comprehensive regression analyses, we find that AI adoption significantly enhances corporate financial asset allocation efficiency, with this relationship being distinctly moderated by organizational dynamic capabilities. Notably, absorptive capability exhibits the strongest moderating effect, followed by innovative and adaptive capabilities. These findings advance our understanding of AI's role in corporate finance by demonstrating that the success of AI implementation in financial decision-making is contingent upon firms' underlying organizational capabilities. The results provide valuable insights for managers and policymakers in developing targeted strategies to enhance the effectiveness of AI adoption in corporate financial management.

Suggested Citation

  • Li, Yu & Zhong, Huiyi & Tong, Qiye, 2024. "Artificial intelligence, dynamic capabilities, and corporate financial asset allocation," International Review of Financial Analysis, Elsevier, vol. 96(PB).
    • Handle: RePEc:eee:finana:v:96:y:2024:i:pb:s1057521924007051
    DOI: 10.1016/j.irfa.2024.103773
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1057521924007051
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.irfa.2024.103773?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Jarrahi, Mohammad Hossein, 2018. "Artificial intelligence and the future of work: Human-AI symbiosis in organizational decision making," Business Horizons, Elsevier, vol. 61(4), pages 577-586.
    2. Shihao Gu & Bryan Kelly & Dacheng Xiu, 2020. "Empirical Asset Pricing via Machine Learning," Review of Finance, European Finance Association, vol. 33(5), pages 2223-2273.
    3. Duan, Yanqing & Edwards, John S. & Dwivedi, Yogesh K, 2019. "Artificial intelligence for decision making in the era of Big Data – evolution, challenges and research agenda," International Journal of Information Management, Elsevier, vol. 48(C), pages 63-71.
    4. Claudio Scardovi, 2017. "Digital Transformation in Financial Services," Springer Books, Springer, number 978-3-319-66945-8, March.
    5. Sullivan, Yulia & Fosso Wamba, Samuel, 2024. "Artificial intelligence and adaptive response to market changes: A strategy to enhance firm performance and innovation," Journal of Business Research, Elsevier, vol. 174(C).
    6. Jiapeng Dai & Qiao Liang & Eddy Tat Hiung Yap, 2024. "Driving Corporate Sustainable Development: Assessing the Impact of ESG Disclosure on Sustainable Growth," Palgrave Studies in Impact Finance, in: Ahmed Imran Hunjra & John W. Goodell (ed.), The Palgrave Handbook of Green Finance for Sustainable Development, chapter 0, pages 595-616, Palgrave Macmillan.
    7. Qaiyum, Sameer & Wang, Catherine L., 2018. "Understanding internal conditions driving ordinary and dynamic capabilities in Indian high-tech firms," Journal of Business Research, Elsevier, vol. 90(C), pages 206-214.
    8. Michael Hilb, 2020. "Toward artificial governance? The role of artificial intelligence in shaping the future of corporate governance," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 24(4), pages 851-870, December.
    9. Xuefeng Shao & Longqi Wang & Xinda Li, 2024. "Financial asset allocations, economic policy uncertainty, and enterprise digital transformation," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 45(4), pages 2613-2626, June.
    10. Shihao Gu & Bryan Kelly & Dacheng Xiu, 2020. "Empirical Asset Pricing via Machine Learning," The Review of Financial Studies, Society for Financial Studies, vol. 33(5), pages 2223-2273.
    11. Saqib Aziz & Michael Dowling & Helmi Hammami & Anke Piepenbrink, 2022. "Machine learning in finance: A topic modeling approach," Post-Print hal-03700508, HAL.
    12. Weihong Xie & Yukun Zou & Haizhen Guo & Yongjian Wang, 2024. "Digital Innovation and Core Competence of Manufacturing Industry: Moderating Role of Absorptive Capacity," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 60(1), pages 185-202, January.
    13. Francesco D’Acunto & Alberto G. Rossi, 2023. "IT meets finance: financial decision-making in the digital era," Chapters, in: Gilles Hilary & David McLean (ed.), Handbook of Financial Decision Making, chapter 16, pages 336-354, Edward Elgar Publishing.
    14. Zhao, Zichao & Li, Dexuan & Dai, Wensheng, 2023. "Machine-learning-enabled intelligence computing for crisis management in small and medium-sized enterprises (SMEs)," Technological Forecasting and Social Change, Elsevier, vol. 191(C).
    15. Wang, Xin & Gan, Yufei & Zhou, Shiqi & Wang, Xinqiao, 2024. "Digital technology adoption, absorptive capacity, CEO green experience and the quality of green innovation: Evidence from China," Finance Research Letters, Elsevier, vol. 63(C).
    16. Abbas, Jaffar & Balsalobre-Lorente, Daniel & Amjid, Muhammad Asif & Al-Sulaiti, Khalid & Al-Sulaiti, Ibrahim & Aldereai, Osama, 2024. "Financial innovation and digitalization promote business growth: The interplay of green technology innovation, product market competition and firm performance," Innovation and Green Development, Elsevier, vol. 3(1).
    17. Jansen, J.J.P. & van den Bosch, F.A.J. & Volberda, H.W., 2005. "Managing Potential and Realized Absorptive Capacity: How do Organizational Antecedents matter?," ERIM Report Series Research in Management ERS-2005-025-STR, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    18. Scott L. Newbert, 2007. "Empirical research on the resource‐based view of the firm: an assessment and suggestions for future research," Strategic Management Journal, Wiley Blackwell, vol. 28(2), pages 121-146, February.
    19. Riadh Manita & Najoua Elommal & Patricia Baudier & Lubica Hikkerova, 2020. "The digital transformation of external audit and its impact on corporate governance," Post-Print hal-04314467, HAL.
    20. Koberg, Christine S. & Uhlenbruck, Nikolaus & Sarason, Yolanda, 1996. "Facilitators of organizational innovation: The role of life-cycle stage," Journal of Business Venturing, Elsevier, vol. 11(2), pages 133-149, March.
    21. David J. Teece & Gary Pisano & Amy Shuen, 1997. "Dynamic capabilities and strategic management," Strategic Management Journal, Wiley Blackwell, vol. 18(7), pages 509-533, August.
    22. Shanmuganathan, Manchuna, 2020. "Behavioural finance in an era of artificial intelligence: Longitudinal case study of robo-advisors in investment decisions," Journal of Behavioral and Experimental Finance, Elsevier, vol. 27(C).
    23. DeAngelo, Harry & DeAngelo, Linda & Stulz, Rene M., 2006. "Dividend policy and the earned/contributed capital mix: a test of the life-cycle theory," Journal of Financial Economics, Elsevier, vol. 81(2), pages 227-254, August.
    24. Neirotti, Paolo & Pesce, Danilo & Battaglia, Daniele, 2021. "Algorithms for operational decision-making: An absorptive capacity perspective on the process of converting data into relevant knowledge," Technological Forecasting and Social Change, Elsevier, vol. 173(C).
    25. Zhou, Kevin Zheng & Li, Caroline Bingxin, 2010. "How strategic orientations influence the building of dynamic capability in emerging economies," Journal of Business Research, Elsevier, vol. 63(3), pages 224-231, March.
    26. Tor Helge Aas & Karl Joachim Breunig, 2017. "Conceptualizing innovation capabilities: A contingency perspective," Journal of Entrepreneurship, Management and Innovation, Fundacja Upowszechniająca Wiedzę i Naukę "Cognitione", vol. 13(1), pages 7-24.
    27. Manita, Riadh & Elommal, Najoua & Baudier, Patricia & Hikkerova, Lubica, 2020. "The digital transformation of external audit and its impact on corporate governance," Technological Forecasting and Social Change, Elsevier, vol. 150(C).
    28. Akter, Shahriar & Hossain, Md Afnan & Sajib, Shahriar & Sultana, Saida & Rahman, Mahfuzur & Vrontis, Demetris & McCarthy, Grace, 2023. "A framework for AI-powered service innovation capability: Review and agenda for future research," Technovation, Elsevier, vol. 125(C).
    29. Yang Yang & Jinmian Han, 2023. "Digital transformation, financing constraints, and corporate environmental, social, and governance performance," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(6), pages 3189-3202, November.
    30. repec:eme:mfppss:mf-12-2021-0586 is not listed on IDEAS
    31. Anthony, Joseph H. & Ramesh, K., 1992. "Association between accounting performance measures and stock prices : A test of the life cycle hypothesis," Journal of Accounting and Economics, Elsevier, vol. 15(2-3), pages 203-227, August.
    32. Li, Lu & Zhou, Shiqi & Xu, Wei & Dai, Jiapeng, 2024. "Green innovation's impact on corporate financing: New insights from BRICS economies," Finance Research Letters, Elsevier, vol. 62(PB).
    33. Shaker A. Zahra & Harry J. Sapienza & Per Davidsson, 2006. "Entrepreneurship and Dynamic Capabilities: A Review, Model and Research Agenda," Journal of Management Studies, Wiley Blackwell, vol. 43(4), pages 917-955, June.
    34. K. D. Joshi & Lei Chi & Avimanyu Datta & Shu Han, 2010. "Changing the Competitive Landscape: Continuous Innovation Through IT-Enabled Knowledge Capabilities," Information Systems Research, INFORMS, vol. 21(3), pages 472-495, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. FeCheng Ma & Farhan Khan & Kashif Ullah Khan & Si XiangYun, 2021. "Investigating the Impact of Information Technology, Absorptive Capacity, and Dynamic Capabilities on Firm Performance: An Empirical Study," SAGE Open, , vol. 11(4), pages 21582440211, November.
    2. Lin, Yini & Wu, Lei-Yu, 2014. "Exploring the role of dynamic capabilities in firm performance under the resource-based view framework," Journal of Business Research, Elsevier, vol. 67(3), pages 407-413.
    3. Cristina Fernandes & João J. Ferreira & Mário L. Raposo & Cristina Estevão & Marta Peris-Ortiz & Carlos Rueda-Armengot, 2017. "The dynamic capabilities perspective of strategic management: a co-citation analysis," Scientometrics, Springer;Akadémiai Kiadó, vol. 112(1), pages 529-555, July.
    4. Mohamed Mansouri & Cheklekbire Malainine & Hayat Souti & Ikram Cadimi, 2022. "Dynamic capabilities, competitiveness and performance of small and medium-sized enterprises: a systematic literature review [Capacités dynamiques, compétitivité et performance des petites et moyenn," Post-Print hal-03794567, HAL.
    5. Jung-Chieh Lee & Wen-Chin Hsu & Chung-Yang Chen, 0. "Impact of absorptive capability on software process improvement and firm performance," Information Technology and Management, Springer, vol. 0, pages 1-15.
    6. Ferreira, Jorge & Coelho, Arnaldo & Moutinho, Luiz, 2020. "Dynamic capabilities, creativity and innovation capability and their impact on competitive advantage and firm performance: The moderating role of entrepreneurial orientation," Technovation, Elsevier, vol. 92.
    7. Jung-Chieh Lee & Wen-Chin Hsu & Chung-Yang Chen, 2018. "Impact of absorptive capability on software process improvement and firm performance," Information Technology and Management, Springer, vol. 19(1), pages 21-35, March.
    8. Haili Zhang & Yufan Wang & Michael Song, 2019. "Does Competitive Intensity Moderate the Relationships between Sustainable Capabilities and Sustainable Organizational Performance in New Ventures?," Sustainability, MDPI, vol. 12(1), pages 1-18, December.
    9. Justin J. P. Jansen & Michiel P. Tempelaar & Frans A. J. van den Bosch & Henk W. Volberda, 2009. "Structural Differentiation and Ambidexterity: The Mediating Role of Integration Mechanisms," Organization Science, INFORMS, vol. 20(4), pages 797-811, August.
    10. João José M. Ferreira & Cristina I. Fernandes & Vanessa Ratten, 2016. "A co-citation bibliometric analysis of strategic management research," Scientometrics, Springer;Akadémiai Kiadó, vol. 109(1), pages 1-32, October.
    11. Luigi Mosca & Martina Gianecchini & Diego Campagnolo, 2021. "Organizational life cycle models: a design perspective," Journal of Organization Design, Springer;Organizational Design Community, vol. 10(1), pages 3-18, March.
    12. Jean D. Kabongo & Olivier Boiral, 2017. "Doing More with Less: Building Dynamic Capabilities for Eco‐Efficiency," Business Strategy and the Environment, Wiley Blackwell, vol. 26(7), pages 956-971, November.
    13. Engelen, Andreas & Kube, Harald & Schmidt, Susanne & Flatten, Tessa Christina, 2014. "Entrepreneurial orientation in turbulent environments: The moderating role of absorptive capacity," Research Policy, Elsevier, vol. 43(8), pages 1353-1369.
    14. Xiaoming He & Yaqun Yi & Zelong Wei, 2019. "New product development capabilities in China: the moderating role of TMT cooperative behavior," Asian Business & Management, Palgrave Macmillan, vol. 18(2), pages 73-97, April.
    15. José A. Belso-Martínez, 2015. "Resources, Governance, and Knowledge Transfer in Spanish Footwear Clusters," International Regional Science Review, , vol. 38(2), pages 202-231, April.
    16. Nadia Zahoor & Yong Kyu Lew, 2022. "Sustaining superior international performance: Strategic orientations and dynamic capability of environmentally concerned small‐ and medium‐sized enterprises," Business Strategy and the Environment, Wiley Blackwell, vol. 31(3), pages 1002-1017, March.
    17. André van Stel & Lorraine Uhlaner & Haibo Zhou & Valerie Duplat, 2012. "Disentangling the effects of organizational capabilities, innovation and firm size on SME sales growth," Scales Research Reports H201211, EIM Business and Policy Research.
    18. Gupta, Shivam & Modgil, Sachin & Choi, Tsan-Ming & Kumar, Ajay & Antony, Jiju, 2023. "Influences of artificial intelligence and blockchain technology on financial resilience of supply chains," International Journal of Production Economics, Elsevier, vol. 261(C).
    19. Brusset, Xavier, 2016. "Does supply chain visibility enhance agility?," International Journal of Production Economics, Elsevier, vol. 171(P1), pages 46-59.
    20. Wei Jiang & Felix Mavondo & Weihong Zhao, 2020. "The impact of business networks on dynamic capabilities and product innovation: The moderating role of strategic orientation," Asia Pacific Journal of Management, Springer, vol. 37(4), pages 1239-1266, December.

    More about this item

    Keywords

    Artificial intelligence adoption; Corporate financial asset allocation; Absorptive capability; Innovative capability; Adaptive capability; Dynamic capabilities; Organizational learning;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • M15 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - IT Management
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:finana:v:96:y:2024:i:pb:s1057521924007051. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/620166 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.