Whistleblowing Bounties and Informational Effects

53 Pages Posted: 8 Jul 2021

See all articles by Lin Nan

Lin Nan

Purdue University

Chao Tang

Hong Kong University of Science & Technology (HKUST) - Department of Accounting

Gaoqing Zhang

University of Minnesota - Twin Cities - Department of Accounting

Date Written: June 24, 2021

Abstract

In this paper, we examine the impact of increasing whistleblowing bounties on whistleblowers' strategy, the information regulators can extract from the whistleblowing program and the regulators' efficiency in detecting fraud. We find that, with a larger bounty, the regulator's information upon receiving a whistleblowing report deteriorates, while, perhaps surprisingly, the regulator's information upon no whistleblowing improves. Ex ante, when the concern about the fraud is sufficiently severe and the whistleblowing program is of high quality, increasing the bounty leads to a positive informational effect, and thus the optimal bounty is at a high level; otherwise, increasing the bounty has a negative informational effect and an intermediate level of bounty is optimal. Our analysis generates both policy and empirical implications for designing and studying the whistleblowing program.

Keywords: Whistleblowing, Regulatory Enforcement, Fraud

Suggested Citation

Nan, Lin and Tang, Chao and Zhang, Gaoqing, Whistleblowing Bounties and Informational Effects (June 24, 2021). Available at SSRN: https://ssrn.com/abstract=3873117 or http://dx.doi.org/10.2139/ssrn.3873117

Lin Nan

Purdue University ( email )

100 S Grant St
West Lafayette, IN 47907
United States
7654960551 (Phone)

Chao Tang (Contact Author)

Hong Kong University of Science & Technology (HKUST) - Department of Accounting ( email )

Clear Water Bay
Kowloon
Hong Kong

Gaoqing Zhang

University of Minnesota - Twin Cities - Department of Accounting ( email )

321 19th Avenue South
Minneapolis, MN 55455
United States

HOME PAGE: http://https://carlsonschool.umn.edu/faculty/gaoqing-zhang

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