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Who Blows the Whistle on Corporate Fraud?I. J. Alexander DyckUniversity of Toronto - Rotman School of Management Adair MorseUniversity of California, Berkeley - Haas School of Business; University of Chicago - Booth School of Business Luigi ZingalesUniversity of Chicago Booth School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); University of Chicago - Polsky Center for Entrepreneurship; European Corporate Governance Institute (ECGI) October 1, 2008 AFA 2007 Chicago Meetings Paper Chicago GSB Research Paper No. 08-22 CRSP Working Paper No. 618 1st Annual Conference on Empirical Legal Studies, Forthcoming ECGI - Finance Working Paper No. 156/2007 Abstract: To identify the most effective mechanisms for detecting corporate fraud we study in depth all reported fraud cases in large U.S. companies between 1996 and 2004. We find that fraud detection does not rely on obvious actors (investors, SEC, and auditors), but takes a village of several non-traditional players (employees, media, and industry regulators). Having access to information or monetary rewards has a significant impact on the probability a stakeholder becomes a whistleblower. Reputational incentives do not work as well. Yet, after SOX auditors' reputation pays off in new client business, increasing their willingness to reveal fraud.
Number of Pages in PDF File: 44 Keywords: Whistleblowers, Corporate Scandals, Corporate Governance, Fraud, Gatekeepers JEL Classification: G30, K20 working papers seriesDate posted: March 15, 2006 ; Last revised: April 14, 2011Suggested CitationContact Information
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