Benford and the Internal Capital Market: A Useful Indicator of Managerial Engagement

Benford and the Internal Capital Market: A Useful Indicator of Managerial Engagement AbstractWe propose the application of digit analysis using the Benford law to indicate managerial engagement in the capital allocation process. First, we motivate the potential of the Benford digit analysis to identify allocation outcomes that are shaped by human engagement instead of fixed decision rules. Second, we provide a case study to illustrate how the Benford digit analysis can be used to detect allocations affected by managerial interventions. We are unaware of any study applying the Benford test to internal capital markets, while this approach appears very useful in this context. It is commonly used in the auditing, financial accounting, and fraud detection literature. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png German Economic Review de Gruyter

Benford and the Internal Capital Market: A Useful Indicator of Managerial Engagement

German Economic Review, Volume 19 (3): 21 – Aug 1, 2018

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Publisher
de Gruyter
Copyright
© 2019 by Walter de Gruyter Berlin/Boston
ISSN
1465-6485
eISSN
1468-0475
DOI
10.1111/geer.12129
Publisher site
See Article on Publisher Site

Abstract

AbstractWe propose the application of digit analysis using the Benford law to indicate managerial engagement in the capital allocation process. First, we motivate the potential of the Benford digit analysis to identify allocation outcomes that are shaped by human engagement instead of fixed decision rules. Second, we provide a case study to illustrate how the Benford digit analysis can be used to detect allocations affected by managerial interventions. We are unaware of any study applying the Benford test to internal capital markets, while this approach appears very useful in this context. It is commonly used in the auditing, financial accounting, and fraud detection literature.

Journal

German Economic Reviewde Gruyter

Published: Aug 1, 2018

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