The hidden cost of smart tools: How does generative AI affect corporate risk-taking?
Haiyue Pan, Zhaoqi Li, Hong Chen · Finance research letters · 2026
This study examines whether generative artificial intelligence (GenAI) adoption influences corporate risk-taking (CRT). We find that GenAI adoption significantly increases CRT, identifying two psychological mechanisms underlying this relationship. First, GenAI raises CEO overconfidence by providing rapid analyses that reduce perceived uncertainty concerning investment outcomes. Second, GenAI increases CEO risk preference by cultivating greater tolerance for ambiguity through repeated exposure to AI-generated scenarios. Cross-sectional heterogeneity tests reveal that GenAI effects are stronger for financially constrained firms and those in technology- and labor-intensive industries. In contrast, the effects are muted in capital-intensive sectors and do not vary across ownership structures. This study contributes to behavioral corporate finance by documenting GenAI-induced psychological biases as drivers of CRT behavior.