Producing AI innovation and its value implications, 2024, with Ali Ahmadi, Roni Michaely, and Phuong-Anh Nguyen
Abstract: We quantify the proliferation of artificial intelligence innovation since 1990. Then, studying publicly traded firms, we find that they direct their production of innovation toward AI, motivated by their own, and their customers', labor's exposure to AI technology. We instrument actual AI production by interacting exogenously measured innovation capacity and AI exposure. We find that, consistently during the past three decades, producing AI transitorily increases profitability, durably decreases risk (both systematic and idiosyncratic), and increases a firm's future stock returns. We can empirically distinguish production of AI innovation from AI adoption, automation, and other potential confounds. The results suggest that AI innovation is firm value increasing but underestimated by investors.
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Best Paper Award, Academy of Finance Conference, 2025
Best Paper Award, Eurasia Business and Economics Society Conference, 2025
Best Paper Award, Finance Symposium, 2024
Do analysts' preferences affect corporate policies?, 2013, with François Degeorge, François Derrien, and Sébastien Michenaud
Abstract: Technology spillovers across firms affect firm value, according to prior research, so information about them should matter to investors. We argue that technology spillovers increase the complexity and uncertainty of value relevant information about the firm, which makes information processing more costly, discourages it, and thereby increases information asymmetry between managers and investors. We find that not only does information asymmetry increase, but institutional ownership and analyst coverage both decrease, and uncertainty increases. We also find that investors underestimate long-term earnings, consistent with the positive abnormal stock returns that we also find.