Evidence on the Use and Efficacy of Internal Whistleblowing Systems
57 Pages Posted: 29 Oct 2018 Last revised: 11 Sep 2019
Date Written: September 9, 2019
Using a proprietary dataset from a provider of internal whistleblowing (WB) systems, we analyze nearly two million internal WB reports submitted to over one thousand publicly traded U.S. firms. We provide descriptive statistics, over time and across report types, on the amount and summary details of information provided, how extensively management reviews reports, the amount of time until reviews were completed, and the outcome of these reviews. Further, we examine the characteristics of firms with more actively used systems (i.e., a higher volume of reports, more information provided in reports, and reports that are more frequently reviewed by management). Finally, we show that internal WB report volume is associated with fewer and lower amounts of government fines and material lawsuits, which is consistent with reports being a resource that deters inappropriate behavior and helps management identify and address concerns before they become more costly to the firm.
Keywords: whistleblowing, employee hotlines, corporate governance, Sarbanes-Oxley Act
JEL Classification: G38, G34, M48, M54
Suggested Citation: Suggested Citation