Who Blows the Whistle on Corporate Fraud?

2010/11/09 by ALEXANDER DYCK, Alexander Dyck, ADAIR MORSE +3 · 1,898 citations
Business, Management and Accounting · Social Sciences · #Accounting #Audit #Auditing, Earnings Management, Governance #Business #Corporate Finance and Governance #Corporate governance #Corruption and Economic Development #Economics #Finance #Financial fraud #Incentive #Microeconomics

paper · doi:10.1111/j.1540-6261.2010.01614.x

published in The Journal of Finance 65(6), 2213-2253 (Wiley)

openalex publication_date 2010/11/09 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/05

Abstract

ABSTRACT To identify the most effective mechanisms for detecting corporate fraud, we study all reported fraud cases in large U.S. companies between 1996 and 2004. We find that fraud detection does not rely on standard corporate governance actors (investors, SEC, and auditors), but rather takes a village, including several nontraditional players (employees, media, and industry regulators). Differences in access to information, as well as monetary and reputational incentives, help to explain this pattern. In‐depth analyses suggest that reputational incentives in general are weak, except for journalists in large cases. By contrast, monetary incentives help explain employee whistleblowing.

Citations

• Agency Problems and the Theory of the Firm
• The Press as a Watchdog for Accounting Fraud

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