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Benford’s law first significant digit and distribution distances for testing the reliability of financial reports in developing countries

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  • Shi, Jing
  • Ausloos, Marcel
  • Zhu, Tingting

Abstract

We discuss a common suspicion about reported financial data, in 10 industrial sectors of the 6 so called “main developing countries” over the time interval [2000–2014]. These data are examined through Benford’s law first significant digit and through distribution distances tests.

Suggested Citation

  • Shi, Jing & Ausloos, Marcel & Zhu, Tingting, 2018. "Benford’s law first significant digit and distribution distances for testing the reliability of financial reports in developing countries," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 492(C), pages 878-888.
  • Handle: RePEc:eee:phsmap:v:492:y:2018:i:c:p:878-888
    DOI: 10.1016/j.physa.2017.11.017
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    References listed on IDEAS

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    1. Marco Corazza & Florence Legros & Cira Perna & Marilena Sibillo, 2017. "Mathematical and Statistical Methods for Actuarial Sciences and Finance," Post-Print hal-01776135, HAL.
    2. De Ceuster, Marc J. K. & Dhaene, Geert & Schatteman, Tom, 1998. "On the hypothesis of psychological barriers in stock markets and Benford's Law," Journal of Empirical Finance, Elsevier, vol. 5(3), pages 263-279, September.
    3. Tam Cho, Wendy K. & Gaines, Brian J., 2007. "Breaking the (Benford) Law: Statistical Fraud Detection in Campaign Finance," The American Statistician, American Statistical Association, vol. 61, pages 218-223, August.
    4. Clippe, Paulette & Ausloos, Marcel, 2012. "Benford’s law and Theil transform of financial data," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(24), pages 6556-6567.
    5. Tariq Ahmad Mir & Marcel Ausloos & Roy Cerqueti, 2014. "Benford's law predicted digit distribution of aggregated income taxes: the surprising conformity of Italian cities and regions," Papers 1410.2890, arXiv.org.
    6. George Judge & Laura Schechter, 2009. "Detecting Problems in Survey Data Using Benford’s Law," Journal of Human Resources, University of Wisconsin Press, vol. 44(1).
    7. Marcel Ausloos & Roy Cerqueti & Tariq A. Mir, 2017. "Data science for assessing possible tax income manipulation: The case of Italy," Papers 1709.02129, arXiv.org.
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    Cited by:

    1. Ausloos, Marcel & Cerqueti, Roy & Bartolacci, Francesca & Castellano, Nicola G., 2018. "SME investment best strategies. Outliers for assessing how to optimize performance," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 509(C), pages 754-765.

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