Whistleblowers and Outcomes of Financial Misrepresentation Enforcement Actions

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

Call, Andrew C. and Martin, Gerald S. and Sharp, Nathan Y. and Wilde, Jaron H., Whistleblowers and Outcomes of Financial Misrepresentation Enforcement Actions (April 1, 2017). Journal of Accounting Research, 56 (1), March 2018, 123-171., Mays Business School Research Paper No. 2506418, Available at SSRN: https://ssrn.com/abstract=2506418 or http://dx.doi.org/10.2139/ssrn.2506418