Human-centric AI (HCAI) is increasingly viewed as a critical component of Industry 5.0, yet its impact on firm-level financial risk has remained largely unquantified. By integrating situated AI theory with socio-technical systems theory, researchers have identified that HCAI acts as a strategic buffer. By prioritizing ethical AI governance and fostering human-AI synergies, firms can better align their operations with diverse stakeholder expectations. This alignment effectively reduces idiosyncratic risk (IR)—the portion of stock volatility specific to a firm rather than the broader market—by signaling stability and reducing the likelihood of AI-related ethical controversies.

Moderating Socio-Technical Factors

The relationship between HCAI and risk reduction is not uniform; it is significantly influenced by a firm's internal socio-technical environment. Based on a panel dataset of Chinese listed firms (2015–2023), the study highlights key variables that alter the efficacy of HCAI strategies:

  • Strengthening Factors: Digitalization and executive shareholding amplify the risk-reducing benefits of HCAI. Higher levels of digitalization likely provide the infrastructure necessary to realize the benefits of human-AI synergy, while executive shareholding aligns leadership incentives with long-term stability.
  • Attenuating Factors: Surprisingly, high operational efficiency and the presence of CEOs with IT backgrounds were found to weaken the risk-reducing effect of HCAI. This suggests that an over-reliance on efficiency-first metrics or a purely technical leadership focus may overlook the nuanced, human-centric aspects of AI integration that stakeholders value for long-term risk mitigation.