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Whistleblowers and Outcomes of Financial Misrepresentation Enforcement Actions

56 Pages Posted: 7 Oct 2014 Last revised: 26 Apr 2017

Andrew C. Call

Arizona State University (ASU) - School of Accountancy

Gerald S. Martin

American University - Kogod School of Business

Nathan Y. Sharp

Texas A&M University - Department of Accounting

Jaron H. Wilde

University of Iowa - Henry B. Tippie College of Business

Date Written: April 2017

Abstract

Whistleblowers are ostensibly a valuable resource to regulators investigating securities violations, but whether there is a link between whistleblower involvement and the outcomes of enforcement actions is unclear. Using a dataset of employee whistleblowing allegations obtained from the U.S. government and the universe of enforcement actions for financial misrepresentation, we find that whistleblower involvement is associated with higher monetary penalties for targeted firms and employees and with longer prison sentences for culpable executives. We also find that regulators more quickly begin enforcement proceedings when whistleblowers are involved. Our findings suggest whistleblowers are a valuable source of information for regulators who investigate and prosecute financial misrepresentation.

Keywords: whistleblowers, enforcement actions, fraud, penalties, financial reporting, Securities and Exchange Commission

JEL Classification: G38, K22, K42, M40, M41, M48

Suggested Citation

Call, Andrew C. and Martin, Gerald S. and Sharp, Nathan Y. and Wilde, Jaron H., Whistleblowers and Outcomes of Financial Misrepresentation Enforcement Actions (April 2017). Available at SSRN: https://ssrn.com/abstract=2506418 or http://dx.doi.org/10.2139/ssrn.2506418

Andrew C. Call

Arizona State University (ASU) - School of Accountancy ( email )

Tempe, AZ 85287
United States

Gerald S. Martin (Contact Author)

American University - Kogod School of Business ( email )

Kogod School of Business
4400 Massachusetts Ave., N.W.
Washington, DC 20016-8044
United States
202-885-3914 (Phone)

Nathan Y. Sharp

Texas A&M University - Department of Accounting ( email )

4353 TAMU
College Station, TX 77843-4353
United States
979-845-0338 (Phone)

Jaron H. Wilde

University of Iowa - Henry B. Tippie College of Business ( email )

Acquisitions
5020 Main Library
Iowa City, IA 52242-1000
United States

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