AI Disclosure and Firm Value: Evidence from China

Abstract This study examines how investors value firm‐level AI disclosure in China's A‐share market, where a large base of retail investors may struggle to interpret technically complex claims, and where strong policy encouragement may increase firms’ incentives to discuss AI regardless of their actual investment and implementation. Using annual report text from 2010 to 2023, we find that AI disclosure is positively associated with contemporaneous and one‐year‐ahead firm valuation, measured by the market equity‐to‐assets ratio. The association is stronger for firms with greater analyst coverage and weaker for firms with greater retail investor participation, consistent with an information‐processing interpretation. We find no clear evidence that the association differs between state‐owned and other firms, but it is stronger for firms with higher AI investment. Firms combining high disclosure with high AI investment are valued more highly than firms with disclosure alone. These investment results are consistent with a credibility interpretation in which observable commitments complement disclosure.