Investors reward companies for simply talking about AI, but charge them more if they actually possess AI capabilities.
April 1, 2026
Original Paper
AI Salience and the Cost of Equity Capital
SSRN · 6504056
The Takeaway
Data shows that 'AI salience'—the narrative use of AI in meetings—reduces a firm's cost of capital by attracting investor recognition. However, actual AI capability is associated with a higher cost of equity because the market views real technological integration as a new form of systematic risk and exposure.
From the abstract
This paper examines whether AI-related corporate narratives are associated with firms' implied cost of equity capital (COE). Using U.S. earnings conference call transcripts from 2002 to 2021, we measure AI disclosure with an expanded dictionary generated using the word2vec method and decompose it into a capability-related component (AI capability) and a residual narrative component, which we interpret as AI salience. We develop a stylized framework in which AI capability and AI salience can