Munich Personal RePEc Archive

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

Mayo, Robert (2015): Hidden Risk: Detecting Fraud in Chinese Banks’ Non-performing Loan Data.

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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.

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