China Business Knowledge at CUHK

Integrating AI into business operations has transitioned beyond a mere efficiency tool, becoming a fundamental insurance policy for organisational survival.

The latest research co-authored by Professor Wu Jing, Professor in the Department of Decisions, Operations and Technology, and Professor Michael Zhang, Wei Lun Professor of Business AI at the same department at CUHK Business School, reveals that AI-empowered roles are essential for navigating the disruptive upheavals of natural disaster shocks.

📌AI talent significantly mitigates stock value erosion and investor lack of confidence during calamities.

📌A minimum hiring threshold of 2.4 per cent AI-related skills enables rapid operational recovery.

📌Financially constrained firms benefit most from AI during crises by reducing operational costs and mitigating risks.

📌AI effectiveness is highest when targeting physical assets and tangible operations rather than reputational damage.

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The nexus between physical infrastructure and financial market stability is often underestimated. A recent study highlights a critical connection: firms headquartered further from financial centres face significantly higher stock price crash risk due to less direct institutional investor oversight.

“Unlike virtual meetings, corporate site visits allow financial analysts and fund managers to directly observe operations, management practices, and local conditions that can improve information accuracy and quality,” says Desmond Tsang, an Associate Professor of Real Estate at the School of Hotel and Tourism Management at CUHK Business School. “This ‘soft information’ often reveals early warning signals of a stock crash and is difficult to capture remotely.”

Crucially, the expansion of high-speed rail networks directly facilitates these visits by reducing travel costs and time, thereby enhancing monitoring and ultimately lowering crash risk for firms in connected cities. This underscores the tangible impact of infrastructure development on market efficiency and corporate governance.

Read more: https://cbk.bschool.cuhk.edu.hk/how-transportation-mitigates-stock-crash-risks-for-remote-firms/

How transportation mitigates stock crash risks for remote firms - China Business Knowledge Where a firm is located affects how often institutional investors visit them in person and their risk of experiencing stock crash, Professor Desmond Tsang finds

Businesses investing in AI often focus on the tech itself but overlook the human element. Resistance and scepticism among employees can stifle AI adoption right when it needs to gain traction.

“Biased beliefs about AI are quite common across industries, especially during the initial deployment in organisations. Employees who hold biased beliefs towards AI tend to underutilise it, and revising such biases plays an important role in addressing algorithm aversion,” says Cao Xinyu, Vice-Chancellor Associate Professor of Marketing at CUHK Business School.

Professor Cao’s study, conducted with an online education platform, implemented a temporary “forced intervention” requiring a group of sales staff to use a new AI tool. The result? A significant increase in AI usage, even after the experiment is over. When workers were compelled to use the AI tool, they experienced its unbiased performance firsthand, leading to a positive update in their beliefs and driving sustained adoption.

The main goal is not compliance but enabling an informed experience with tangible results. “By transparently showing improvements, firms can help correct workers’ biased beliefs about AI and reduce resistance to adoption.”

Read more: https://cbk.bschool.cuhk.edu.hk/can-force-adoption-solve-ai-resistance/

Can force adoption solve AI resistance? - China Business Knowledge The human tendency to distrust computer algorithms, even when they perform better, is pervasive. Professor Cao Xinyu finds mandatory use may solve AI resistance

The latest research by Prof Li Jingyu, Assistant Professor of the Department of Management at CUHK Business School, indicates that technological abundance can undermine organisational resilience during unexpected shocks.⚡🌩️ A study of 2,926 listed Chinese firms found that a moderate range of digital tools provides the optimal balance for maintaining information flow without incurring excessive coordination costs.

📌IT portfolio diversity: The variety of deployed tools—from cloud computing to enterprise software—must be managed strategically.

📌The complexity trap: Excessive digital variety increases planning costs and hampers rapid decision-making in a crisis.

📌Leadership power: Senior technology executives with board-level authority are essential to resolve conflicts and redirect resources.

📌Sector impact: Hard-hit industries like hospitality see the greatest payoff from combining diverse tools with authoritative tech leadership.

Read the full article: https://bit.ly/49t1Fb8

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As businesses increasingly operate in an unpredictable world, building genuine resilience is paramount. Investing in AI can be the lifeline that helps firms survive calamities.

Professors Wu Jing and Michael Zhang from the Department of Decisions, Operations and Technology at CUHK Business School find that firms with higher AI investments demonstrated significantly greater resilience when hit by natural disaster shocks. These AI-intensive companies experience more moderate financial losses and faster recoveries in their stock valuations than those with lower AI adoption.

AI acts as a crucial “insurance policy,” helping businesses maintain production output even when traditional labour and capital inputs are disrupted. However, its realised productivity is often limited by a lack of complementary organisational designs, underscoring the need for strategic integration and supporting infrastructure to unlock the full potential of AI.

Read more: https://cbk.bschool.cuhk.edu.hk/can-ai-help-businesses-weather-any-storm/

Navigating major shocks such as financial crises, geopolitical conflicts, or trade disputes requires a robust IT system and organisational resilience. Having a variety of IT tools and systems helps companies bounce back from crises, but only up to a point, because excessive IT diversity can introduce additional complexity.

“Having too much variety of IT tools can actually make it more costly and difficult for companies to come up with new plans, decide on the best ones, and then put them into action,” says Li Jingyu, an Assistant Professor of the Department of Management at CUHK Business School. “This problem gets much, much worse during unexpected shocks, where companies have to make decisions and act quickly.”

Having strong IT leadership also matters. When IT leaders have greater authority, companies can effectively manage a wider range of technological tools, improving their resilience without incurring prohibitive costs. The key takeaway is that balancing IT resources and empowering IT leaders is essential to help companies survive and thrive in uncertain times.

Read more: https://cbk.bschool.cuhk.edu.hk/why-too-much-tech-hurts-resilience/

Why too much tech hurts resilience - China Business Knowledge Companies have many options to choose tech tools, but does having more technology make a company more resilient? Not necessarily, Professor Li Jingyu finds

Ever wondered how companies react when their external auditor's reputation takes a hit? Instead of immediately switching auditors, most companies stay with the audit office while significantly increasing their voluntary disclosures.

“Financial disclosure is an important means for managers to communicate private information to outsiders, thereby reducing the information asymmetry and providing greater clarity on firm performance,” says Zhao Meiling, Assistant Professor at the School of Accountancy at CUHK Business School.

Higher voluntary transparency helps to offset concerns about perceived lower audit quality, especially among firms facing higher information demands from external stakeholders. Crucially, these increased disclosures aren't just for show; they lead to tangible market benefits, helping to reduce the cost of equity and improve realised returns.

Read more: https://cbk.bschool.cuhk.edu.hk/why-do-clients-stay-with-embroiled-audit-firms/

Why do clients stay with embroiled audit firms? - China Business Knowledge Investors rely on audited reports to judge a company’s health, but what happens if an auditor's reputation is tarnished? Professor Zhao Meiling finds the answer