AI Disclosure in Annual Reports: Evolution, Determinants, and Capital Market Participants’ Perceptions

ABSTRACT We provide large-sample evidence on the prevalence, determinants, and capital market consequences of artificial intelligence (AI) disclosures in U.S. firms’ Form 10-K filings from 2017 to 2024. Using comprehensive AI-related keywords and a large language model, we document a gradual rise in AI disclosure prior to ChatGPT and sharp increases thereafter, particularly in Risk Factors. Post-ChatGPT, AI risk disclosures become longer, more specific, and less boilerplate. Firms’ disclosure of AI-related information is strongly associated with ex ante exposure to AI technologies and ex post AI-related negative incidents. Examining market reactions, we find no association between these disclosures and information environment quality prior to ChatGPT’s release. After ChatGPT, AI disclosure among high-exposure firms is associated with lower post-filing volatility but higher analyst forecast dispersion and error, suggesting divergent interpretations by investors and analysts. Our findings inform ongoing debates on AI transparency and disclosure regulation. Data Availability: Data used in this study are publicly available. JEL Classifications: M41; G14; O33.