Whistle-blowing: Target firm characteristics and economic consequences

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

Research output: Contribution to journalArticlepeer-review

171 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 2010
Externally publishedYes


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

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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