Artificial Intelligence Adoption and Corporate ESG Performance

ABSTRACT Based on the annual report of Chinese listed companies, we use machine learning methods to generate an artificial intelligence (AI) dictionary, and then construct firm‐level AI measurements. Our empirical findings suggest that the use of AI by companies can significantly improve their environmental, social, and governance (ESG) performance by alleviating the financing constraints, improving information transparency, and improving corporate innovation. Further, our heterogeneity analysis shows that the impact of the use of AI on firms' ESG performance is more pronounced in regions with highly developed factor markets, in asset‐intensive industries, and in industries characterized by high levels of competition. This paper contributes to the existing research on corporate ESG performance and provides a theoretical foundation for companies to advance the development and application of AI technology.