Whistle‐Blowing and Incentives in Firms

Guido Friebel () and Sergei Guriev

Journal of Economics & Management Strategy, 2012, vol. 21, issue 4, 1007-1027

Abstract: Whistle‐blowing is an important mechanism of corporate governance. We show that whistle‐blowing has negative effects on productive efficiency by undermining the incentives within a corporate hierarchy. In our model, a top manager intends to overreport earnings; a division manager may have evidence about the intended overreporting. We show that the division manager is more likely to have such evidence when the performance of his own division is low. Top management may offer a bribe to prevent the manager from blowing the whistle. This provides the division manager with an additional payoff when his division’s output is low. Therefore, potential whistle‐blowing undermines the division manager’s incentives to exert effort, which results in a less efficient outcome.

Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
https://doi.org/10.1111/j.1530-9134.2012.00354.x

Related works:
Working Paper: Whistle-Blowing and Incentives in Firms (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jemstr:v:21:y:2012:i:4:p:1007-1027

Ordering information: This journal article can be ordered from
http://www.blackwell ... ref=1058-6407&site=1

Access Statistics for this article

More articles in Journal of Economics & Management Strategy from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().