AI companies seem to be ignoring the economic rule that says high interest rates should slow down investment.
March 19, 2026
Original Paper
AI Firms: An Exception to Agency Theory
SSRN · 6439326
The Takeaway
According to classic Agency Theory, when investors don't understand a complex business, they charge a premium for debt which usually forces the company to cut spending. While lenders are indeed charging AI firms higher interest due to their complexity, these firms are continuing to invest at the same or higher rates, breaking a core rule of corporate finance.
From the abstract
This paper focuses on the information asymmetry between AI firms and outside investors. According to the previous theory, asymmetric information between two agents lead to an increase in the Agency Cost of Debt, consequently deterring corporate investment. In this study, I develop a framework of Principal (Outside Investors) and Agent (AI firms) to estimate changes in agency cost and corporate investment in order to examine whether the classical Agency theory applies to AI firms. After employing