The Effect of Incentive Framing and Descriptive Norms on Internal Whistleblowing

40 Pages Posted: 12 Feb 2019 Last revised: 11 Apr 2019

See all articles by Clara Xiaoling Chen

Clara Xiaoling Chen

University of Illinois at Urbana-Champaign - Department of Accountancy

Jennifer E. Nichol

Northeastern University

Flora H. Zhou

Bentley University

Date Written: June 22, 2017

Abstract

Firms are under increasing pressure to implement effective internal whistleblowing systems. While firms can provide incentives to encourage internal whistleblowing, it remains controversial how such incentives should be structured. We examine whether the effectiveness of incentives encouraging internal whistleblowing is a joint function of the framing of such incentives (reward or penalty) and the strength of descriptive norms supporting internal whistleblowing. We predict and find in a lab experiment that penalties lead to a greater increase in internal whistleblowing (compared to rewards) when descriptive norms supporting whistleblowing are stronger. Our study contributes to the previous accounting literature on dishonesty and the role of management control systems design in promoting honesty and ethical norms in organizations. We also contribute to an emerging accounting literature on the links between controls, norms, and individual behavior by distinguishing between descriptive norms and injunctive norms and by highlighting the interplay between these two types of norms. Our results have important implications for organizations considering adopting incentives to encourage internal whistleblowing.

Keywords: rewards, penalties, internal whistleblowing

Suggested Citation

Chen, Clara Xiaoling and Nichol, Jennifer and Zhou, Flora H., The Effect of Incentive Framing and Descriptive Norms on Internal Whistleblowing (June 22, 2017). Contemporary Accounting Research, Vol. 34, No. 4, 2017. Available at SSRN: https://ssrn.com/abstract=3327651

Clara Xiaoling Chen

University of Illinois at Urbana-Champaign - Department of Accountancy ( email )

1206 South Sixth Street
Champaign, IL 61820
United States

Jennifer Nichol (Contact Author)

Northeastern University ( email )

360 Huntington Ave.
Boston, MA 02115
United States

Flora H. Zhou

Bentley University ( email )

175 Forest Street
Waltham, MA 02145
United States

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