The Impact of AI Governance on the Financial Reporting Quality: Sustainable Dimensions

Abstract

The study aims to investigate the role of artificial intelligence (AI) governance on financial reporting quality (FRQ), exploring how various governance mechanisms influence sustainable corporate behavior in the Gulf Cooperation Council (GCC) region. The study employs the quantitative research method of multiple regression analysis (the study uses a dataset of 18,560 firm-year observations of publicly listed companies from the GCC region), exploring how dimensions of AI governance (ethical compliance, data transparency, regulatory compliance) relate to financial reporting quality and firms’ sustainability. The study provides evidence of a statistically significant, positive relationship between robust AI governance and higher levels of financial reporting quality, supporting the notion that organizations with strong measurements of AI governance are more likely to produce financial disclosures of appropriate transparency, accuracy, and reliability that could support long-term sustainability. The results of this research provide new evidence for organizational actors (leaders, regulators, policymakers) to strengthen financial transparency, potentially leading to sustainable development, though evidence of enhanced stewardship of the AI process under consideration serves only as an important first step toward supporting productive, sustained engagement with AI-enhanced corporate performance. Finally, this study provides one of the first empirical investigations linking AI governance to financial reporting quality within the GCC context. By using a large-scale dataset, it offers robust evidence on how responsible AI integration can strengthen corporate accountability, improve reporting practices, and support sustainable economic growth.