THE EFFECT OF THE DODD-FRANK ACT  ON CORPORATE WHISTLEBLOWING

Aaron Wilson

The Sarbanes-Oxley Act of 2002, passed as a result of financial scandals, introduced anti-retaliation protection to corporate whistleblower. The discussion of whistleblower incentives was again revisited in 2008 with the passage of the Dodd-Frank Act. The new legislation contains strengthened anti-retaliation protection as well as the introduction of a reward incentive. This dissertation attempts to evaluate the various reporting options available to a whistleblower and measure the effects of key factors such as anonymity, anti-retaliation protection, and reward incentive. The first study uses an exploratory survey to understand the judgment and decision making process of whistleblowers under the constraints of the Dodd-Frank Act. Participants were drawn from an on-line MBA class and reported a mean of 13 years of professional work experience. Participants provided information on topics such as the various reporting options available and their likelihood of reporting, the sequence they would follow if using more than one reporting channel, the perceived threat of discovery and retaliation from each channel, and the perceived benefit and perceived cost of reporting. Additional qualitative data was obtained related to costs and benefits of reporting. To measure the effect of anonymity and anti-retaliation protection, a 2 (anonymity: present/absent) x 2(anti-retaliation protection: strong/weak) x 3 (fraud type: asset misappropriation/financial statement fraud/corruption) repeated measures design was implemented. Subsequently, perceived cost was examined to evaluate its effect as a mediator. Next, anonymity and reward incentive were evaluated by implementing a 2 (anonymity: high/low) x 2(reward incentive: present/absent) x 3 (fraud type: asset misappropriation/financial statement fraud/corruption) repeated measures design. Following this analysis, perceived benefit and perceived cost were examined to determine their mediating role in reporting intention judgment and decision making. Findings suggest that while anti-retaliation protection and reward incentive do not have a main effect on reporting intentions, perceived benefit and perceived cost serve to mediate their effect on reporting intentions. In addition, findings suggest strengthened anti-retaliation protection increases perceived cost while reward incentive reduces both perceived benefit and perceived cost. These findings are contrary to expectations as strengthened anti-retaliation protection and reward incentive are the two key components of the new whistleblower legislation.

THE EFFECT OF THE DODD-FRANK ACT ON CORPORATE WHISTLEBLOWING

Files and links (1)

Abstract

Metrics

Details