Do current regulations prevent unethical AI practices?

The rapid growth of artificial intelligence (AI) to ensure the competitiveness of corporations, driven by “data-hungry” companies, is raising ethical concerns about privacy governance and cybersecurity of datasets. It is key to avoid the abuse of users not aware of the economic value of their data, as well as their manipulation through advertising in digital markets, and by predicting their behavior, also to avoid the abuse of consumers’ ignorance about the ethics of the products/services they consume. The European Union, through the Artificial Intelligence Act, developed a set of rules to safeguard the impact of AI on society and mitigate the adverse consequences of unethical behaviors, but these unethical AI practices are still occurring. This study uses an event model to calculate cumulative abnormal returns (CARs) with registered data on fines from AI ethical violations to measure the impact on financial markets of news about the unethical behavior of offending firms and to determine whether shareholders are rewarding these activities. Results help explain how some firms and their shareholders become immune to financial economic sanctions and turn into multi-violators who are not affected by the amount of the fines imposed on them, developing a “fine is a price” attitude. In summary, the findings of this study advise companies against engaging in this type of malpractice and make a great contribution in helping governments prevent the misuse of AI and its potentially disastrous consequences at both the individual and societal levels.