Do Artificial Intelligence applications affect firm stock liquidity? Evidence from China

ABSTRACTThis study explores the relationship between AI applications and firm stock liquidity. We measure the AI applications of Chinese listed firms based on text analytics on annual reports from 2007 to 2020. Our results show that AI applications increase stock liquidity, and the effect of AI on increasing stock liquidity is more significant in SOEs and high-tech firms. In addition, AI increases stock liquidity by enhancing market attention rather than directly improving firm performance.KEYWORDS: AI applicationsstock liquiditymarket attentionfirm performanceJEL CLASSIFICATION: C23D21O33 Disclosure statementNo potential conflict of interest was reported by the author(s).Additional informationFundingWe gratefully acknowledge financial support from the Guangdong Natural Science Foundation [2022A1515011046], and the Statistical Science Research Foundation of China [2021LY089]. The authors remain responsible for any remaining errors or omissions.