Rights statement: This is the peer reviewed version of the following article: Patel, P. C., Tsionas, M. G., & Guedes, M. J. (2022). Benford's law, small business financial reporting, and survival. Managerial and Decision Economics, 1– 15. https://doi.org/10.1002/mde.3595 which has been published in final form at https://onlinelibrary.wiley.com/doi/10.1002/mde.3595 This article may be used for non-commercial purposes in accordance With Wiley Terms and Conditions for self-archiving.
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Final published version
Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
}
TY - JOUR
T1 - Benford's law, small business financial reporting, and survival
AU - Patel, Pankaj C.
AU - Tsionas, Mike G.
AU - Guedes, Maria João
N1 - This is the peer reviewed version of the following article: Patel, P. C., Tsionas, M. G., & Guedes, M. J. (2022). Benford's law, small business financial reporting, and survival. Managerial and Decision Economics, 1– 15. https://doi.org/10.1002/mde.3595 which has been published in final form at https://onlinelibrary.wiley.com/doi/10.1002/mde.3595 This article may be used for non-commercial purposes in accordance With Wiley Terms and Conditions for self-archiving.
PY - 2022/12/31
Y1 - 2022/12/31
N2 - Benford's law states that in collections of numbers, the leading digit is likely to be small. Drawing on this law, which is a widely used tool in forensic accounting, we ask whether small and medium-sized enterprises (SMEs) that violate Benford's law on the reporting of key accounting items are more likely to fail. Using a sample of 220,583 Portuguese SMEs (2010–2018), those companies violating Benford's law in reporting cash had the highest odds of failure, followed by net income, current liabilities, assets, and sales. The findings indicate that myopic strategic manipulation in financial reporting may lead to SME failure.
AB - Benford's law states that in collections of numbers, the leading digit is likely to be small. Drawing on this law, which is a widely used tool in forensic accounting, we ask whether small and medium-sized enterprises (SMEs) that violate Benford's law on the reporting of key accounting items are more likely to fail. Using a sample of 220,583 Portuguese SMEs (2010–2018), those companies violating Benford's law in reporting cash had the highest odds of failure, followed by net income, current liabilities, assets, and sales. The findings indicate that myopic strategic manipulation in financial reporting may lead to SME failure.
KW - Management of Technology and Innovation
KW - Management Science and Operations Research
KW - Strategy and Management
KW - Business and International Management
U2 - 10.1002/mde.3595
DO - 10.1002/mde.3595
M3 - Journal article
VL - 43
SP - 3301
EP - 3315
JO - Managerial and Decision Economics
JF - Managerial and Decision Economics
SN - 0143-6570
IS - 8
ER -