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Whistleblower protection: Theory and experimental evidence

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  • Mechtenberg, Lydia
  • Muehlheusser, Gerd
  • Roider, Andreas

Abstract

Whistleblowing by employees plays a major role in uncovering corporate fraud. Recent laws and global policy recommendations aim at facilitating whistleblower protection to enhance the willingness to report and to increase the detection and deterrence of misbehavior. We study these issues in a theory-guided laboratory experiment. As expected, protecting whistleblowers leads to more reporting of misbehavior. However, the predicted improvements in detection and deterrence do not materialize in the experiment. This is mainly driven by prosecutors being less inclined to investigate upon a report when protection is in place.

Suggested Citation

  • Mechtenberg, Lydia & Muehlheusser, Gerd & Roider, Andreas, 2020. "Whistleblower protection: Theory and experimental evidence," European Economic Review, Elsevier, vol. 126(C).
  • Handle: RePEc:eee:eecrev:v:126:y:2020:i:c:s0014292120300799
    DOI: 10.1016/j.euroecorev.2020.103447
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    Cited by:

    1. Mechtenberg, Lydia & Muehlheusser, Gerd & Roider, Andreas, 2020. "Whistleblower protection: Theory and experimental evidence," European Economic Review, Elsevier, vol. 126(C).
    2. Armenak Antinyan & Luca Corazzini & Filippo Pavesi, 2018. "What Matters for Whistleblowing on Tax Evaders? Survey and Experimental Evidence," Working Papers 07/2018, University of Verona, Department of Economics.
    3. Paolo Buccirossi & Giovanni Immordino & Giancarlo Spagnolo, 2021. "Whistleblower rewards, false reports, and corporate fraud," European Journal of Law and Economics, Springer, vol. 51(3), pages 411-431, June.
    4. Bodnar, Olivia & Fremerey, Melinda & Normann, Hans-Theo & Schad, Jannika Leonie, 2021. "The effects of private damage claims on cartel activity: Experimental evidence," DICE Discussion Papers 315, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    5. Guerra, Alice & Zhuravleva, Tatyana, 2021. "Do bystanders react to bribery?," Journal of Economic Behavior & Organization, Elsevier, vol. 185(C), pages 442-462.
    6. Antinyan, Armenak & Corazzini, Luca & Pavesi, Filippo, 2020. "Does trust in the government matter for whistleblowing on tax evaders? Survey and experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 171(C), pages 77-95.

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    More about this item

    Keywords

    Corporate fraud; Corruption; Whistleblowing; Business ethics; Cheap-talk games; Laboratory experiment;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • M59 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Other

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