{"title":"The deterrent effect of the SEC Whistleblower Program on financial reporting securities violations","authors":"Christine Wiedman, Chunmei Zhu","doi":"10.1111/1911-3846.12884","DOIUrl":null,"url":null,"abstract":"<p>The stated goal of the SEC Whistleblower Program introduced as part of the Dodd-Frank Act was to deter securities violations and thereby to strengthen investor protection. We document significant reductions in the likelihood of financial reporting fraud by US firms following the introduction of this program. The reductions are robust to controlling for other regulatory changes in the Dodd-Frank Act and economic trends. Given that employees of firms with weaker internal compliance and reporting programs are more likely to report irregularities directly to the SEC rather than internally, we predict and find that these firms are more likely to change their reporting behavior. We also show that the observed reductions are attributable to an improvement in internal whistleblower programs and the hiring of more capable audit committee members after the program's inception. Collectively, these findings provide important large-sample evidence of significant benefits of the SEC Whistleblower Program for deterring financial reporting fraud and of the efficacy of bounty-type whistleblower programs.</p>","PeriodicalId":10595,"journal":{"name":"Contemporary Accounting Research","volume":null,"pages":null},"PeriodicalIF":3.2000,"publicationDate":"2023-06-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://onlinelibrary.wiley.com/doi/epdf/10.1111/1911-3846.12884","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Contemporary Accounting Research","FirstCategoryId":"91","ListUrlMain":"https://onlinelibrary.wiley.com/doi/10.1111/1911-3846.12884","RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
The stated goal of the SEC Whistleblower Program introduced as part of the Dodd-Frank Act was to deter securities violations and thereby to strengthen investor protection. We document significant reductions in the likelihood of financial reporting fraud by US firms following the introduction of this program. The reductions are robust to controlling for other regulatory changes in the Dodd-Frank Act and economic trends. Given that employees of firms with weaker internal compliance and reporting programs are more likely to report irregularities directly to the SEC rather than internally, we predict and find that these firms are more likely to change their reporting behavior. We also show that the observed reductions are attributable to an improvement in internal whistleblower programs and the hiring of more capable audit committee members after the program's inception. Collectively, these findings provide important large-sample evidence of significant benefits of the SEC Whistleblower Program for deterring financial reporting fraud and of the efficacy of bounty-type whistleblower programs.
期刊介绍:
Contemporary Accounting Research (CAR) is the premiere research journal of the Canadian Academic Accounting Association, which publishes leading- edge research that contributes to our understanding of all aspects of accounting"s role within organizations, markets or society. Canadian based, increasingly global in scope, CAR seeks to reflect the geographical and intellectual diversity in accounting research. To accomplish this, CAR will continue to publish in its traditional areas of excellence, while seeking to more fully represent other research streams in its pages, so as to continue and expand its tradition of excellence.