IMPACT OF ARTIFICIAL INTELLIGENCE ON FINANCIAL PERFORMANCE; EVIDENCE FROM THE BANKING SECTOR OF PAKISTAN

Abstract

One ofthe key forces behind Industry 4.0 is artificial intelligence. This study evaluates the effect financial performance of using Al-related terminology in annual reports, concentrating on locally listed Pakistani banks. In the world of banking and finance, there has been a lot of discussion on how artificial intelligence (AI) could affect financial performance. The purpose of this study is to look at how artificial intelligence (AI) affects financial performance in relation to the financial sector. With a special emphasis on profitability, cost effectiveness, and risk management, the study's goal is to investigate the connection between AI deployment and financial performance measures. The study also examines how firm size affects this connection moderator. To accomplish these goals, a thorough assessment of the literature on AI in finance is done, offering insights into the possible advantages and difficulties of AI adoption. It aids in understanding the adoption stage ofAI. Through the examination of a sample of 20 banks and 400 annual reports spanning twenty years, a quantitative research approach is used. For this analysis, a sample of banks, including both major and small institutions, were surveyed for financial data. To investigate the link between AI adoption, financial performance measures, and the moderating impact offirm size, multiple regression models were used. Data collecting from a sample of financial enterprises, including both big and small businesses, is part of the study process. Overall, the results indicate a linear growth in the use of Al-related phrases. Al-related phrases don't have enough capacity to explain financial performance. However, there is some evidence in favor of a positive impact. The study's conclusions are followed by a number of recommendations. First and foremost, financial companies should carefully evaluate the advantages and drawbacks of adopting AI while taking into account their unique organizational traits and resources. Additionally, smaller businesses should look for strategies to get beyond resource and technological obstacles that prevent the use ofAI.