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Applying Benford’s law to detect accounting data manipulation in the banking industry.

Papanikolaou, N.I. and Grammatikos, T., 2020. Applying Benford’s law to detect accounting data manipulation in the banking industry. Journal of Financial Services Research. (In Press)

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Official URL: https://link.springer.com/journal/10693

Abstract

We utilise Benford’s Law to test if balance sheet and income statement data broadly used to assess bank soundness were manipulated prior to and also during the global financial crisis. We find that all banks resort to loan loss provisions to manipulate earnings and income upwards. Distressed institutions that have stronger incentives to conceal their financial difficulties resort additionally to manipulating loan loss allowances and non-performing loans downwards. Moreover, manipulation is magnified during the crisis and expands to encompass regulatory capital.

Item Type:Article
ISSN:0920-8550
Uncontrolled Keywords:financial crisis; banks; Benford’s Law; financial accounting; data manipulation.
Group:Faculty of Management
ID Code:33509
Deposited By: Unnamed user with email symplectic@symplectic
Deposited On:26 Feb 2020 09:07
Last Modified:26 Feb 2020 10:35

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