Whistle-blowing: Target firm characteristics and economic consequences

Robert M. Bowen, Andrew C. Call, Shiva Rajgopal

Research output: Contribution to journalArticle

98 Scopus citations


We document the first systematic evidence on the characteristics and economic consequences of firms subject to employee allegations of corporate financial misdeeds. First, compared to a control group that avoided public whistle-blowing allegations, firms subject to whistle-blowing allegations were characterized by unique firm-specific factors that led employees to expose alleged financial misdeeds. Second, on average, whistle-blowing announcements were associated with a negative 2.8 percent market-adjusted five-day stock price reaction; this reaction was especially negative for allegations involving earnings management (-7.3 percent). Third, compared to a control group that exhibits similar characteristics, firms subject to whistle-blowing allegations were associated with further negative consequences including earnings restatements, shareholder lawsuits, and negative future operating and stock return performance. Finally, whistle-blowing targets exposed by the press were more likely to make subsequent improvements in corporate governance. Our results suggest whistle-blowing is far from a trivial nuisance for targeted firms, and on average, appears to be a useful mechanism for uncovering agency issues.

Original languageEnglish (US)
Pages (from-to)1239-1271
Number of pages33
JournalAccounting Review
Issue number4
StatePublished - Jul 1 2010


  • Corporate governance
  • Earnings management
  • Financial misdeeds
  • Whistle-blowing

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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