Applying Benford’s Law to examine earnings management: Evidence from emerging ASEAN-5 countries

Loan Nguyen, Tri Tri Nguyen, Thanh Le, Nghia Mai

Research output: Contribution to journalArticlepeer-review


© 2023, [Emerald insight]. This is an author produced version of a paper published in [Journal of Financial Reporting and Accounting] uploaded in accordance with the publisher’s self- archiving policy. The final published version (version of record) is available online at the link. Some minor differences between this version and the final published version may remain. We suggest you refer to the final published version should you wish to cite from it.

Purpose - This research applies Benford’s Law to examine the earnings management of companies listed in emerging ASEAN-5 countries: Indonesia, Malaysia, Philippines, Thailand, and Vietnam.

Design/methodology/approach - We follow Amiram et al. (2015) to measure deviations from Benford’s Law of the first digits of numbers reported in financial statements. We use the Jones-modified performance-match model (Jones, 1991; Dechow et al., 1995; Kothari et al., 2005) to estimate accrual earnings management. We use a sample of 47,389 observations of listed companies in ASEAN-5 countries from 2006 to 2019. We run OLS regressions to test our hypotheses.

Findings - We find that the first digits of numbers reported in the financial statements of companies in the sample closely conform to Benford’s Law. Further evidence shows that the deviation from Benford’s Law is positively related to abnormal accruals. The relationship between deviation from Benford’s Law and abnormal accruals is more pronounced for the post-IFRS adoption period. The results survive for some robustness checks.

Research limitations/implications - We show that Benford’s Law holds for financial statements of companies listed in the emerging ASEAN-5 countries.

Practical implications - Auditors could use Benford’s Law as an analytical procedure to assess the risks of material misstatements. Also, other users could apply Benford’s Law on audited financial statements to foresee undetected misstatements.

Originality/value - We provide original evidence that financial statements of ASEAN-5 countries follow Benford’s Law. The evidence supports the usefulness of Benford’s Law in developing markets.
Original languageEnglish
JournalJournal of Financial Reporting and Accounting
Publication statusAccepted/In press - 5 Jul 2023


  • Benford’s Law
  • Earnings Management
  • ASEAN countries
  • Vietnam

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