The Hidden Costs of Whistleblower Protection
43 Pages Posted: 19 Jun 2023
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The Hidden Costs of Whistleblower Protection
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 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, whistleblowing, business ethics, laboratory experiment
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