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

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Listed:
  • Durongkadej, Isarin
  • Hu, Wenyao
  • Wang, Heng Emily

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.

Suggested Citation

  • Durongkadej, Isarin & Hu, Wenyao & Wang, Heng Emily, 2024. "How artificial intelligence incidents affect banks and financial services firms? A study of five firms," Finance Research Letters, Elsevier, vol. 70(C).
    • Handle: RePEc:eee:finlet:v:70:y:2024:i:c:s1544612324013084
    DOI: 10.1016/j.frl.2024.106279
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    Keywords

    Artificial intelligence; Banks; Financial industry;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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