Artificial Intelligence and Corporate Internal Control Quality: Evidence from Chinese Listed Firms
TL;DR
It is indicated that AI significantly improves corporate internal control quality, mainly by enhancing firms’ human capital and reducing agency costs, and is more pronounced among manufacturing firms, firms with higher levels of digital infrastructure, and firms with greater information transparency.
Abstract
Against the backdrop of a new wave of scientific and technological revolution and industrial transformation, artificial intelligence has emerged as a pivotal technology for fostering new quality productive forces and advancing high-quality development, and is profoundly reshaping firms’ production organization and governance structures. Using data on Chinese A-share listed companies from 2016 to 2024, this study empirically examines the impact of AI on corporate internal control quality and its underlying mechanisms. The results indicate that AI significantly improves corporate internal control quality, mainly by enhancing firms’ human capital and reducing agency costs. Further heterogeneity analysis shows that the positive effect of AI on internal control quality is more pronounced among manufacturing firms, firms with higher levels of digital infrastructure, and firms with greater information transparency. From the perspective of internal corporate governance, this study extends the literature on the economic consequences of AI and provides empirical evidence on how AI, as embedded in a complex socio-technical system, empowers high-quality corporate development through institutional governance mechanisms. The findings also offer useful implications for governments seeking to refine AI-related policies and for firms aiming to promote the coordinated upgrading of intelligent transformation and internal control systems.