We present a comprehensive evaluation of the ability of large language models (LLMs) to process culturally grounded language, specifically to understand and pragmatically use figurative expressions that encode local knowledge and cultural nuance. Using figurative language as a proxy for cultural nuance and local knowledge, we design evaluation tasks for contextual understanding, pragmatic use, and connotation interpretation in Arabic and English. We evaluate 22 open- and closed-source LLMs on Egyptian Arabic idioms, multidialectal Arabic proverbs, and English proverbs. Our results show a consistent hierarchy: the average accuracy for Arabic proverbs is 4.29% lower than for English proverbs, and performance for Egyptian idioms is 10.28% lower than for Arabic proverbs. For the pragmatic use task, accuracy drops by 14.07% relative to understanding, though providing contextual idiomatic sentences improves accuracy by 10.66%. Models also struggle with connotative meaning, reaching at most 85.58% agreement with human annotators on idioms with 100% inter-annotator agreement. These findings demonstrate that figurative language serves as an effective diagnostic for cultural reasoning: while LLMs can often interpret figurative meaning, they face challenges in using it appropriately. To support future research, we release Kinayat, the first dataset of Egyptian Arabic idioms designed for both figurative understanding and pragmatic use evaluation.

Across various applications, humans increasingly use black-box artificial intelligence (AI) systems without insight into these systems' reasoning. To counter this opacity, explainable AI (XAI) methods promise enhanced transparency and interpretability. While recent studies have explored how XAI affects human-AI collaboration, few have examined the potential pitfalls caused by incorrect explanations. The implications for humans can be far-reaching but have not been explored extensively. To investigate this, we ran a study (n=160) on AI-assisted decision-making in which humans were supported by XAI. Our findings reveal a misinformation effect when incorrect explanations accompany correct AI advice with implications post-collaboration. This effect causes humans to infer flawed reasoning strategies, hindering task execution and demonstrating impaired procedural knowledge. Additionally, incorrect explanations compromise human-AI team-performance during collaboration. With our work, we contribute to HCI by providing empirical evidence for the negative consequences of incorrect explanations on humans post-collaboration and outlining guidelines for designers of AI.