The Hidden Costs of Whistleblower Protection

Wallmeier Niklas () and Promann Timo ()
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Wallmeier Niklas: Department of Economics, 14915 Universität Hamburg , Hamburg, Germany
Promann Timo: Department of Economics, 14915 Universität Hamburg , Hamburg, Germany

Review of Law & Economics, 2025, vol. 21, issue 2, 535-560

Abstract: We 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. We 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 in organizations if it increases the probability for whistleblowing.

Keywords: corporate fraud; whistleblowing; business ethics; laboratory experiment (search for similar items in EconPapers)
JEL-codes: C91 D73 K42 M51 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1515/rle-2024-0075

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