The Hidden Costs of Whistleblower Protection
43 Pages Posted: 5 Feb 2018 Last revised: 10 Feb 2023
There are 2 versions of this paper
The Hidden Costs of Whistleblower Protection
Date Written: January 24, 2023
Abstract
I conduct a laboratory experiment to analyze the influence of whistleblower protection on the cooperative behavior between a manager and an employee. Before taking part in a trust game with her employee, a manager has the opportunity to embezzle money at the expense of a third party. The employee observes her decision and may trigger an investigation by blowing the whistle. The treatments vary with respect to immunity and anonymity for the whistleblower. I compare misbehavior, reporting, and the cooperative behavior across the treatments. The results suggest that whistleblower protection could deter wrongdoing, but could also have a detrimental effect on cooperation if it makes it harder for the employee to signal trustworthiness.
Keywords: corporate fraud, corruption, laboratory experiment, business ethics, whistleblowing
JEL Classification: C91, D73, K42, M51
Suggested Citation: Suggested Citation