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Benford's law and Chinese banks' non-performing loans

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  • Kauko, Karlo

Abstract

Benford's law states that the leading significant digits in real-world data sets, provided the data span several orders of magnitude, are not normally uniformly distributed. Deviations from this law may indicate human intervention, even fraud. The data on Chinese banks' non-performing loans has sometimes deviated from Benford's law. Up to 2012, the frequency of ones as leading significant digits was lower than predicted by Benford's law. Surprisingly, the number of ones well exceeded the expected level for large and government-owned banks during 2015–2018.

Suggested Citation

  • Kauko, Karlo, 2019. "Benford's law and Chinese banks' non-performing loans," BOFIT Discussion Papers 25/2019, Bank of Finland Institute for Emerging Economies (BOFIT).
    • Handle: RePEc:zbw:bofitp:bdp2019_025
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    References listed on IDEAS

    as
    1. Fewster, R. M., 2009. "A Simple Explanation of Benford's Law," The American Statistician, American Statistical Association, vol. 63(1), pages 26-32.
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    More about this item

    JEL classification:

    • C46 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Specific Distributions
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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