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The transparency of AI and the profits of the firm
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DOI：10.1016/j.jcorpfin.2026.103002.png)
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Abstract
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The paper models the relationship between the transparency of a prominent firm’s AI technology and its profits. Users adopting the firm’s AI provide data, the technology’s key input. I show that, under rational expectations, the firm benefits from making the technology less transparent to users. Although reduced transparency may lower adoption and data collection, it can curb excess spending. The lack of transparency does not depend on competition or legal risks, but on the firm’s incentives to impress investors. Lack of transparency is thus inherent to technology development. Funding sources beyond financial investors or an adequate capital structure could motivate the firm to increase transparency.
Keywords:
AI transparency
firm profits
user data
rational expectations
investor incentives
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