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Artificial intelligence, dynamic capabilities, and corporate financial asset allocation

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  • 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
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    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

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