Whether and how automation mitigates firm’s risk?

Automation has become a central driver of corporate operational transformation, yet its implications for firms’ exposure to aggregate economic shocks remain unexplored. Utilizing a panel of Chinese A-share listed firms from 2000 to 2024, we find a negative association between automation penetration and systematic risk across a series of robustness checks. The decline in systematic risk can be attributed to the reduced labour cost rigidity and enhanced production flexibility entailed by automation. Furthermore, we document risk-mitigating effects among industry and provincial peers. Overall, our findings highlight a risk dimension of corporate technological transformation that automation is not only an operational technology but also a potential means of reducing firms’ exposure to market-wide shocks.