Financial Systemic Risk behind Artificial Intelligence:Evidence from China

Jingyi Tian and Jun Nagayasu

No 44, TUPD Discussion Papers from Graduate School of Economics and Management, Tohoku University

Abstract: As an important domain of information technology development, artificial intelligence (AI) has garnered significant popularity in the financial sector. While AI offers numerous advantages, investigating potential risks associated with the widespread use of AI has become a critical point for researchers. We examine the impact of AI technologies on systemic risk within China’s financial industry. Our findings suggest that AI helps mitigate the increase of systemic risk. However, the impact of AI differs across different financial sectors and is more pronounced during crisis periods. Our study also suggests that AI can decrease systemic risk by enhancing the human capital of financial firms. Moreover, the theoretical framework presented in this paper provides insights into the notion that imprudent allocation of AI-related investment could potentially contribute to an increase in systemic risk.

Pages: 42 pages
Date: 2023-11
New Economics Papers: this item is included in nep-ain, nep-cmp, nep-cna, nep-fdg, nep-ict and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:toh:tupdaa:44

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