How artificial intelligence incidents affect banks and financial services firms? A study of five firms

•This study investigates the impact of artificial intelligence (AI) incidents on banking and the financial industries by analyzing five U.S. banks and financial services firms.•We find that the average short-term cumulative abnormal returns (CARs) loss of AI incidents on banks and financial services firms is −21.04 % and the negative impact can spread out to the financial industry with a three-day loss of −0.13 %.•Compared to firms without AI incidents, banks and financial services firms with AI incidents have higher bankruptcy risk and lower operational cash flows. We investigate the impact of AI incidents on banking and the financial industries. By analyzing five U.S. banks and financial services firms, we find that the average short-term Cumulative Abnormal Returns (CARs) loss of AI incidents is -21.04 % and the negative impact can spread out to the financial industry with a three-day loss of -0.13 %. Compared to firms without AI incidents, banks and financial services firms with AI incidents have higher bankruptcy risk and lower operational cash flows. To our knowledge, this is the first study analyzing the AI incident impact on the performance of banks and financial services firms.