The strategic role of Artificial Intelligence in attracting foreign institutional investors: A comparative analysis of new and old firms

Abstract

The rapid advancements in artificial intelligence (AI) and its deployment by firms are important factors in attracting investors. By using the data of A-share Chinese listed firms from 2016 to 2022, this study attempts to estimate the possible linkage of AI adoption by firms in appealing the Foreign Institutional Investors (Foreign II's). The study findings indicate the following: (1) AI is positively linked to Foreign II's. (2) The heterogeneity analysis shows that this linkage is stronger in new firms. (3) Firm performance significantly improves the relationship between AI and Foreign II's. (4) In contrast, firm age negatively influences this relationship. After employing several robustness tests, the study findings remain validated. Overall, we provide important insights and actionable references to support the strategic incorporation of AI into organizational operations, aiming to attract foreign investments.