Hidden Risk: Detecting Fraud in Chinese Banks’ Non-performing Loan Data

Robert L. Mayo
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Robert L. Mayo: Offutt School of Business, Concordia College, Moorhead, MN USA

International Journal of Finance & Banking Studies, 2022, vol. 11, issue 1, 98-106

Abstract: Using self-reported data from banks in mainland China, I apply a technique used in forensic accounting based on Benford’s Law to detect fraudulent manipulation of non-performing loan (NPL) figures. I find large data anomalies consistent with false reporting in mainland banks that do not appear in an identically structured survey of Hong Kong banks. A comparison of different types of data from mainland banks shows no statistically significant anomalies in data for total deposits from customers, operating expenses, net interest income, or non-interest income.

Keywords: China; Banking; Non-performing loans; Fraud; Benford distribution (search for similar items in EconPapers)
Date: 2022
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