Artificial intelligence disclosure and the value relevance of earnings

This study investigates the effect of AI disclosure on the value relevance of earnings using Chinese listed companies from 2013 to 2022. We find that AI disclosure significantly enhances earnings’ value relevance. Mechanism tests show that AI disclosure increases firms’ earnings quality and boosts investor attention, thus elevating the value relevance of earnings. Heterogeneity analysis further reveals that this effect is more pronounced in firms in advanced manufacturing industries, firms in highly competitive industries and non-SOEs. Overall, this study highlights the important role of AI disclosure in the price discovery of both fundamental and unexpected earnings, and contributes to a deeper understanding of the underlying mechanisms through which AI affects the value relevance of earnings.