Investigating earnings and revenue management in Jordanian companies through Benford’s law

Abstract

This study explores how financial figures—specifically revenue and net income—are reported by 164 companies listed on the Amman Stock Exchange in Jordan. By applying Benford’s Law, the research analyzes the distribution of the first and second digits in these figures over a ten-year period (2010–2023) to identify any irregularities or rounding behavior. The companies were grouped based on whether they reported positive or negative net income. The analysis of the first digit reveals that revenue figures across Jordanian companies tend to deviate from expected patterns, regardless of whether the firms were profitable or not. Among firms with positive net income, there are minor signs of potential manipulation, while those with losses do not exhibit such behavior. On the other hand, the second digit analysis shows no statistically significant evidence of rounding in either revenue or net income data. These findings highlight the need for stronger oversight and preventive measures to reduce the risk of earnings management in Jordan’s financial reporting practices.