AI-Driven Financial Reporting and Investment Decision Quality: The Mediating Role of Investor Trust and Moderating Role of Financial Literacy

Abstract

This study explores the relationship between financial reporting using AI, financial transparency and the quality of investment decisions by analysing the investor trust and the moderating effect of financial literacy. The study is based on Signalling Theory and Information Asymmetry Theory and concentrates on the focus group of individual investors in Pakistan Stock Exchange. The number of usable responses from the instruments was 428 and the data was analysed with PLS-SEM. The results reveal that AI financial reporting and financial transparency can enhance investor trust, while investor trust can improve investment decision quality. The impact of AI-driven reporting and transparency on investment decisions is also influenced by investor trust. Furthermore, elevating financial literacy enhances the bond between AI-driven reporting, transparency, and investor trust. The study highlights the importance of trustworthy digital reporting, transparent disclosures, and investor education in emerging market contexts.

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