AI disclosure becomes double-edged sword for financial performance and ESG outcomes

Artificial intelligence is influencing how companies are valued by investors and regulators. A new peer-reviewed study published in Electronics provides fresh evidence that transparency in disclosing AI adoption has direct links to both financial performance and sustainability outcomes.

The study, titled "Driving Sustainable Value. The Dynamic Interplay Between Artificial Intelligence Disclosure, Financial Reporting Quality, and ESG Scores," closely examines the disclosure practices of 55 companies listed on the Bucharest Stock Exchange over the period 2018–2022, shedding light on the complex relationship between corporate reporting, AI adoption, and sustainability measures.

Company size and disclosure patterns

The research assesses whether company characteristics determine the degree of transparency around AI usage. The findings confirm that larger companies are more likely to disclose their reliance on artificial intelligence in business processes. In contrast, industry type and the number of employees do not significantly influence disclosure behavior.

This pattern suggests that size provides companies with both the resources and the incentive to communicate more openly about AI adoption. Larger firms typically have more complex governance structures, greater investor scrutiny, and more advanced digital infrastructure, which makes disclosure a natural extension of their operations. Smaller and medium-sized enterprises, however, face challenges in allocating resources toward both implementing AI and communicating its use effectively.

The study also revealed that disclosure levels were uneven across industries. Manufacturing and communications companies demonstrated higher degrees of AI transparency compared to other sectors, underscoring their faster integration of digital technologies. Still, disclosure levels overall remained low, with many companies choosing not to highlight AI-related initiatives in official reports. This suggests a widespread hesitancy to present AI adoption strategies publicly, potentially due to competitive concerns or lack of regulatory guidance.

Financial performance: Liquidity gains but profit pressures

The authors also explore whether AI disclosure correlates with financial outcomes. Using indicators such as return on assets, return on equity, current ratio, and net profit, the analysis produced a nuanced picture of AI’s financial impact.

The study found a statistically significant positive relationship between AI disclosure and current liquidity, meaning that firms which were more transparent about AI adoption tended to have stronger short-term financial stability. This suggests that investors may interpret AI-related disclosures as signals of innovation and future competitiveness, thereby improving a company’s ability to secure financing and maintain liquidity.

However, the research also revealed a striking paradox: companies with higher AI disclosure scores often reported lower net profits. This negative association highlights the upfront costs of AI adoption, which include investment in technology, system integration, and workforce training. These expenses can weigh heavily on short-term profitability even as they position companies for long-term gains.

Return on assets and return on equity showed no statistically significant correlations with AI disclosure. This indicates that while transparency around AI may influence liquidity and market perception, its direct connection to profitability and return measures is less clear in the short term. The results suggest that AI’s financial impact is highly dependent on the timeframe considered, with short-term costs overshadowing potential long-term efficiency and growth benefits.

ESG scores and the sustainability dimension

Next up, the researchers examined how AI disclosure interacts with environmental, social, and governance (ESG) performance. Here, the findings were more tentative but nevertheless revealing.

The study identified signs that companies combining AI disclosure with higher ESG scores may achieve superior financial performance compared to peers that disclose less or score lower on ESG indicators. Specifically, a moderate interaction was observed between ESG exposure and AI disclosure, pointing to the possibility that sustainability-oriented firms may be better positioned to leverage AI investments for competitive advantage.

However, this relationship was not strongly statistically significant, and the authors caution that more robust, large-scale studies are required. Data limitations restricted the analysis to a subset of firms with available ESG scores, meaning conclusions must be interpreted carefully. Nonetheless, the research contributes to the growing debate on how AI can strengthen sustainability practices, particularly by reducing greenwashing and improving transparency in corporate governance.

The findings resonate with broader global discussions on responsible technology adoption. As ESG metrics gain prominence in capital markets, the ability of companies to integrate AI not just operationally but also within transparent sustainability frameworks is likely to become a defining feature of corporate value.

Implications for business and policy

For managers, the message is that transparency in AI use can improve liquidity and investor confidence, but they must be prepared for the financial strain of initial adoption. Disclosing AI activities should be framed not only as a technical advancement but also as part of broader communication strategies aimed at stakeholders.

For regulators, the findings highlight the absence of standardized frameworks for AI disclosure. While companies already follow established rules for financial reporting and ESG metrics, the integration of AI-related information remains inconsistent. Policymakers may need to develop clearer guidelines to ensure comparability and reduce the risk of selective or misleading disclosures.