Bloated Disclosures: Can ChatGPT Help Investors Process Information?
Generative AI tools such as ChatGPT can fundamentally change the way investors process information. We probe the economic usefulness of these tools in summarizing complex corporate disclosures using the stock market as a laboratory. The unconstrained summaries are remarkably shorter compared to the...
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Zusammenfassung: | Generative AI tools such as ChatGPT can fundamentally change the way
investors process information. We probe the economic usefulness of these tools
in summarizing complex corporate disclosures using the stock market as a
laboratory. The unconstrained summaries are remarkably shorter compared to the
originals, whereas their information content is amplified. When a document has
a positive (negative) sentiment, its summary becomes more positive (negative).
Importantly, the summaries are more effective at explaining stock market
reactions to the disclosed information. Motivated by these findings, we propose
a measure of information ``bloat." We show that bloated disclosure is
associated with adverse capital market consequences, such as lower price
efficiency and higher information asymmetry. Finally, we show that the model is
effective at constructing targeted summaries that identify firms'
(non-)financial performance. Collectively, our results indicate that generative
AI adds considerable value for investors with information processing
constraints. |
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DOI: | 10.48550/arxiv.2306.10224 |