Who Blows the Whistle on Corporate Fraud?
I. J. Alexander Dyck
University of Toronto - Rotman School of Management
University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER)
University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)
October 1, 2008
AFA 2007 Chicago Meetings Paper
Chicago GSB Research Paper No. 08-22
CRSP Working Paper No. 618
1st Annual Conference on Empirical Legal Studies, Forthcoming
ECGI - Finance Working Paper No. 156/2007
To identify the most effective mechanisms for detecting corporate fraud we study in depth all reported fraud cases in large U.S. companies between 1996 and 2004. We find that fraud detection does not rely on obvious actors (investors, SEC, and auditors), but takes a village of several non-traditional players (employees, media, and industry regulators). Having access to information or monetary rewards has a significant impact on the probability a stakeholder becomes a whistleblower. Reputational incentives do not work as well. Yet, after SOX auditors' reputation pays off in new client business, increasing their willingness to reveal fraud.
Number of Pages in PDF File: 44
Keywords: Whistleblowers, Corporate Scandals, Corporate Governance, Fraud, Gatekeepers
JEL Classification: G30, K20
Date posted: March 15, 2006 ; Last revised: April 14, 2011