Whistleblowers and Outcomes of Financial Misrepresentation Enforcement Actions
56 Pages Posted: 7 Oct 2014 Last revised: 23 May 2019
Date Written: April 2017
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: Suggested Citation