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Whistleblower Rewards, False Reports, and Corporate Fraud

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Abstract

It is often claimed that rewards for whistleblowers lead to fraudulent reports, but for several US programs this has not been a major problem. We model the interaction be- tween rewards for whistleblowers, sanctions against fraudulent reporting, judicial errors and standards of proof in the court case on a whistleblower.s allegations and the pos- sible follow-up for fraudulent allegations. Balancing whistleblower rewards, sanctions against fraudulent reports, and courts.standards of proof is essential for these policies to succeed. When the risk of retaliation is severe, larger rewards are needed and so are tougher sanctions against fraudulent reports. The precision of the legal system must be su¢ ciently high, hence these programs are not viable in weak institution environ- ments, where protection is imperfect and court precision low, or where sanctions against false reporting are mild. Internal reporting channels may interfere with external ones in unexpected ways.

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  • Paolo Buccirossi & Giovanni Immordino & Giancarlo Spagnolo, 2017. "Whistleblower Rewards, False Reports, and Corporate Fraud," CSEF Working Papers 477, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 02 Sep 2017.
    • Handle: RePEc:sef:csefwp:477
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    1. Nyreröd, Theo & Spagnolo, Giancarlo, 2017. "Myths and Numbers on Whistleblower Rewards," SITE Working Paper Series 44, Stockholm School of Economics, Stockholm Institute of Transition Economics, revised 27 Apr 2018.
    2. Ni Made Mega Abdi Utami & Gugus Irianto & Yeney Widya Prihatiningtias, 2020. "Analyzing the effect of financial reward, personal cost and reporting channel on whistleblowing intentions utilizing an experimental study," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 9(2), pages 125-132, March.

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    More about this item

    Keywords

    Whistleblowers rewards; False allegations; Judicial errors; Standard of proof; Corporate fraud;
    All these keywords.

    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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