THE IMPACT OF DISCLOSURE OF ARTIFICIAL INTELLIGENCE RISKS ACCORDING TO THE K-10 MODEL ON INVESTOR CONFIDENCE IN THE BANKING SECTOR

Abstract

The increasing adoption of artificial intelligence (AI) in the banking sector has enhanced operational efficiency while simultaneously introducing governance, cybersecurity, ethical, and regulatory risks that require transparent disclosure. This study examines the impact of AI risk disclosure, based on the Securities and Exchange Commission (SEC) K-10 disclosure framework, on investor confidence in the Iraqi banking sector. A quantitative research design was employed by integrating content analysis of annual reports from five banks listed on the Iraq Stock Exchange with questionnaire responses collected from 150 investors. A multidimensional AI Risk Disclosure Index comprising five dimensions and eighteen disclosure items was developed to evaluate disclosure practices. The findings reveal considerable variation in AI risk disclosure among the sampled banks, indicating the absence of standardized reporting practices. Furthermore, regression analysis demonstrates that AI risk disclosure has a positive and significant effect on investor confidence, suggesting that transparent disclosure reduces information asymmetry and enhances investors' trust in financial institutions. This study contributes to the literature by operationalizing the SEC K-10 framework in an emerging economy and providing a practical disclosure index that can assist banks and regulators in improving AI governance, disclosure quality, and market transparency while strengthening investor confidence.