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Whistleblowers and financial fraud

Author

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  • Shy, Oz

Abstract

Whistleblowers who report financial crimes are treated differently than whistleblowers in other sectors. This is because of the potential for partial recovery of the loss caused by financial fraud. The paper shows that the optimal whistleblower reward is a fraction of the amount that is recovered from fraud loss, which is capped at the level that can no longer attract additional whistleblowers. The paper also analyzes how rewards to whistleblowers affect heterogeneous potential fraudsters’ decision to commit fraud and why additional penalties in the form of monetary fines and/or jail time are needed.

Suggested Citation

  • Shy, Oz, 2026. "Whistleblowers and financial fraud," Journal of Financial Stability, Elsevier, vol. 82(C).
    • Handle: RePEc:eee:finsta:v:82:y:2026:i:c:s1572308925001238
    DOI: 10.1016/j.jfs.2025.101494
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    Keywords

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    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • K14 - Law and Economics - - Basic Areas of Law - - - Criminal Law
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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