Cash-for-Information Whistleblower Programs: Effects on Whistleblowing and Consequences for Whistleblowers

Abstract

We study the effect of financial incentives on whistleblowing and the consequences for whistleblowers under the cash-for-information program of the False Claims Act (FCA). Exploiting appeals-court decisions that increase financial incentives for whistleblowing, we find that greater incentives increase the number of lawsuits filed with the regulator, the regulator’s investigation length, the percentage of intervened lawsuits, and the percentage of settled lawsuits. Using information from lawsuits, a professional networking site, and background checks for up to 1,168 whistleblowers, we find that whistleblowers’ long-term annual income decreases by approximately 8.6% or $6,500 but do not find evidence of social costs. In comparison, whistleblowers can expect to receive approximately $140,000 for blowing the whistle. Overall, our results suggest that the FCA cash-for-information program helps expose corporate misconduct and helps compensate whistleblowers for their income loss.

Keywords: Whistleblowers, cash-for-information whistleblower programs, False Claims Act, corporate misconduct, consequences for whistleblowers

JEL Classification: D82, G18, M41