Do State Whistleblower Laws Reduce Corporate Fraud?

• In Event: Earnings Management, Investments & Corporate Fraud

Abstract

We use data collected from the Executive Office for U.S. Attorneys to investigate whether state whistleblower laws have an impact on corporate fraud. For the 18 states whose whistleblower laws have provisions that protect private employees, a higher awareness of whistleblower laws is associated with a lower state-level conviction rate for corporate fraud. This finding is consistent with the hypothesis that whistleblower laws that cover private employees have a deterrent effect on corporate fraud, and that awareness of the laws plays a crucial role in determining their effectiveness as a public policy tool.

Authors

• Adriana S. Cordis, Winthrop University

• Elizabeth M. Lambert, Winthrop University