Applying Benford’s law to detect accounting data manipulation in the banking industry

We utilise Benford’s Law to test if balance sheet and income statement data broadly used to assess bank soundness were manipulated prior to and also during the global financial crisis. We find that all banks resort to loan loss provisions to manipulate earnings and income upwards. Distressed institutions that have stronger incentives to conceal their financial difficulties resort additionally to manipulating loan loss allowances and non-performing loans downwards. Moreover, manipulation is magnified during the crisis and expands to encompass regulatory capital

Strong constraints on aerosol-cloud interactions from volcanic eruptions.

Aerosols have a potentially large effect on climate, particularly through their interactions with clouds, but the magnitude of this effect is highly uncertain. Large volcanic eruptions produce sulfur dioxide, which in turn produces aerosols; these eruptions thus represent a natural experiment through which to quantify aerosol-cloud interactions. Here we show that the massive 2014-2015 fissure eruption in Holuhraun, Iceland, reduced the size of liquid cloud droplets-consistent with expectations-but had no discernible effect on other cloud properties. The reduction in droplet size led to cloud brightening and global-mean radiative forcing of around -0.2 watts per square metre for September to October 2014. Changes in cloud amount or cloud liquid water path, however, were undetectable, indicating that these indirect effects, and cloud systems in general, are well buffered against aerosol changes. This result will reduce uncertainties in future climate projections, because we are now able to reject results from climate models with an excessive liquid-water-path response

Timescales of Quartz Crystallization and the Longevity of the Bishop Giant Magma Body

Supereruptions violently transfer huge amounts (100 s–1000 s km3) of magma to the surface in a matter of days and testify to the existence of giant pools of magma at depth. The longevity of these giant magma bodies is of significant scientific and societal interest. Radiometric data on whole rocks, glasses, feldspar and zircon crystals have been used to suggest that the Bishop Tuff giant magma body, which erupted ∼760,000 years ago and created the Long Valley caldera (California), was long-lived (>100,000 years) and evolved rather slowly. In this work, we present four lines of evidence to constrain the timescales of crystallization of the Bishop magma body: (1) quartz residence times based on diffusional relaxation of Ti profiles, (2) quartz residence times based on the kinetics of faceting of melt inclusions, (3) quartz and feldspar crystallization times derived using quartz+feldspar crystal size distributions, and (4) timescales of cooling and crystallization based on thermodynamic and heat flow modeling. All of our estimates suggest quartz crystallization on timescales of <10,000 years, more typically within 500–3,000 years before eruption. We conclude that large-volume, crystal-poor magma bodies are ephemeral features that, once established, evolve on millennial timescales. We also suggest that zircon crystals, rather than recording the timescales of crystallization of a large pool of crystal-poor magma, record the extended periods of time necessary for maturation of the crust and establishment of these giant magma bodies

CEO Profile and Earnings Quality

This paper introduces the PSCORE, which aggregates nine personal characteristics of chief executive officers (CEOs), to signal the quality of earnings. The PSCORE is a composite score based on publicly available data on CEOs. The study reports strong positive relationships between the PSCORE and two different proxies for earnings quality, (i) discretionary accruals and (ii) financial statement errors, measured by deviations of the first digits of figures reported in financial statements from those expected by Benford’s Law. Further analyses indicate that the relationships between the PSCORE and the proxies for earnings quality become more pronounced when CEOs have high equity-based compensation incentives. The findings have some implications for practitioners

Beyond equilibrium climate sensitivity

ISSN:1752-0908ISSN:1752-089