Whistle-Blower Protection: Theory and Experimental Evidence

Lydia Mechtenberg, Gerd Muehlheusser () and Andreas Roider
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Gerd Muehlheusser: University of Hamburg

No 10607, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Whistle-blowing by employees plays a major role in uncovering corporate fraud. Various recent laws aim at improving protection of whistle-blowers and enhancing their willingness to report. Evidence on the effectiveness of such legislation is, however, scarce. Moreover, critics have raised worries about fraudulent claims by low-productivity employees. We study these issues in a theory-guided lab experiment. Easily attainable ("belief-based") protection indeed leads to more reports, both truthful and fraudulent. Fraudulent claims dilute prosecutors' incentives to investigate, and thereby hamper deterrence. These effects are ameliorated under more stringent ("fact-based") protection.

Keywords: business ethics; whistle-blowing; corruption; corporate fraud; cheap-talk games; lab experiment (search for similar items in EconPapers)
JEL-codes: C91 D73 D83 K42 M59 (search for similar items in EconPapers)
Pages: 61 pages
Date: 2017-03
New Economics Papers: this item is included in nep-exp, nep-hrm and nep-law
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Published - revised version published in: European Economic Review, 2020, 126, 103447

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Related works:
Journal Article: Whistleblower protection: Theory and experimental evidence (2020)
Working Paper: Whistle-Blower Protection: Theory and Experimental Evidence (2017)
Working Paper: Whistle-Blower Protection: Theory and Experimental Evidence (2017)
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