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What Impact does Artificial Intelligence have on Corporate Governance?
In recent years, the topic of ‘digital transformation’ has become a primary focus in the areas of business and research. Among digital technologies, the area attracting the most investment is artificial intelligence (AI). Research shows that AI can benefit corporate governance in a variety of ways.
In this article, we identify two academic streams on the topic and evaluate the existing literature. The first stream analyses AI-driven improvements in governance mechanisms such as boards of directors (BoD). The second stream explores the digital-driven organisational changes and broad governance adaptations necessary for AI improvements. We evaluate the evidence for AI implementation in improving and evolving traditional aspects of corporate governance.
The examined authors argue that digital technologies transform the nature of a firm, making it less based on traditional sources of authority. There is consensus that this environment calls for fundamental reconsideration of corporate governance and for the revision of regulatory models, moving towards decentralisation. Specific areas examined in these contexts include jobs automation, agency conflict, auditing processes, the selection of BoD members, compliance functions, data analytics, and capital allocation.
The examined research indicates that AI improves corporate governance and lowers agency cost by automating decision making using real-time big data analysis. However, while researchers propose multiple novel approaches to governance, practical implementation of those approaches or an empirical analysis of the results of such experiments is yet to occur.
Despite the consensus among researchers on the positive impact of AI for governance and implementations as making AI a part of BoD, open questions and skepticism persist. This is indicative of the immaturity of AI as a technology in terms of development and implementation, and as such there is ample scope for future research. We propose multiple areas within this article where opportunities exist for further insight within this burgeoning field.