A subtle, yet potentially dangerous shift is underway in one of the most influential narrative sections of financial reports: the Management’s Discussion and Analysis (MD&A). Companies are increasingly crafting these disclosures not just for human shareholders or regulators, but for machines.
This shift isn’t theoretical. In a recent article, I argued that artificial intelligence
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When AI Follows the Rules but Misses the Point
By Wei Jiang
When a team of researchers asked an artificial intelligence system to design a railway network that minimized the risk of train collisions, the AI delivered a surprising solution: Halt all trains entirely. No motion, no crashes. A perfect safety record, technically speaking, but also a total failure of purpose. The system did exactly what it…
When More Is Less: Information Overload in AI-Driven Finance
Large language models (LLMs) are rapidly becoming integral to financial analysis, from parsing earnings calls to predicting stock market reactions to news. But a critical question remains: When we feed these models more information, do they perform better? Our recent study suggests, not necessarily. We document a structural limitation of LLMs in financial tasks, a…
Regulating Algorithmic Accountability in Financial Advising
By Chen Wang
Artificial intelligence (AI) tools, particularly large language models, are quickly becoming integral to financial advising. Recent evidence, however, demonstrates that they can act against investors’ interests. In a 2023 experiment,researchers deployed GPT‑4 as an autonomous trading agent and found that it executed an insider trade and then concealed the reason, evidence that sophisticated models can…
SEC Chair Testifies Before Senate Appropriations Subcommittee on Financial Services
Chairman Hagerty, Ranking Member Reed, and members of the Subcommittee. Thank you for inviting me to testify today.[1]
I am grateful for the opportunity to discuss the Securities and Exchange Commission, including our important mission on behalf of our fellow citizens, investors, and taxpayers. I also appreciate the opportunity as well to speak to
…
Pay-to-Play in Venture Capital Financing
By Gad Weiss
The startup ecosystem fuels America’s economy in ways few other sectors can match. It has also ridden waves of boom and bust, with periods of explosive growth followed by cool-downs. During these market downturns, capital becomes scarce and investors must make difficult decisions about which startups in their portfolios deserve continued support. In a new…
SEC Chair Testifies Before House Appropriations Subcommittee on Financial Services
Chairman Joyce, Ranking Member Hoyer, and members of the Subcommittee. Thank you for inviting me to testify today.[1]
I am grateful for the opportunity to discuss the SEC, including our important mission on behalf of our fellow citizens, investors, and taxpayers. I also appreciate the opportunity as well to speak to some of my…
The Corporate Restructuring Machine: How AI Could Improve Workouts
Out-of-court corporate restructurings, or “corporate workouts,” involve high-stakes multi-party negotiations without a clear procedural framework, such as the one that Chapter 11 provides. This gives the parties the freedom to design workouts without the constraints imposed by a rigid legal process – and can save them significant amounts of money.
At the same time, corporate…
How Accurate Are Corporate AI Disclosures?
Artificial intelligence (AI) is emerging as a general purpose technology (GPT) with the potential to transform industries. As a result, the potential benefits of AI give firms strong reasons to adopt it – but also provides opportunities to exaggerate their investments in it. Unlike previous GPTs such as the steam engine or electricity, which required…
Scaling Core Earnings Measurement With Large Language Models
Large language models (LLMs) are capturing headlines and users as AI researchers push the limits of their capabilities. Those of us who work on understanding and analyzing corporations, whether as practitioners or researchers, are presented with two practical questions: What can these models do for us that wasn’t previously possible (their upside), and when, how,…