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

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Title: Benford’s law and Chinese banks’ non-performing loans
Author: Kauko, Karlo
Organization: Bank of Finland
Department / Unit: Institute for Economies in Transition (BOFIT)
Series: BOFIT Discussion Papers
Series number: 25/2019
Year of publication: 2019
Publication date: 19.12.2019
Pages: 12
Subject (yso): pankit; luotot
Keywords: Bofit-kokoelma; Kiina
JEL: C46; G21
Other keywords: China; banks; Benford’s law; non-performing loans
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.
Table of contents: Abstract ..4 1 Introduction ..5 2 The data and its distribution ..6 3 The situation since 2015 – panel logit analyses ..8 4 Conclusions ..10 References ..11

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