The Effects of Whistleblower Program Financial Incentives and Administration on Financial Managers’ Reporting Judgments

The accounting whistleblower literature has expanded with the passage of antifraud regulations such as the Sarbanes-Oxley and Dodd-Frank Acts. Prior studies focus primarily on the detection of the perceived wrongdoing through whistleblower intentions rather than prevention through the potential whistleblower targets (e.g., financial managers). We study the effects of whistleblower program financial incentives (i.e., incentives or no incentives) and whistleblower program administration (i.e., internally or externally) on financial managers’ reporting judgments. A sample of 91 experienced financial managers provided their likelihood to recognize goodwill impairment in an experiment where whistleblower program incentives and administration were manipulated randomly between subjects. Results indicate that financial managers make more conservative judgments when the whistleblower program includes financial incentives. We find a significant interaction where financial managers are most likely to recognize impairment when incentives exist and the program is administered internally. Supplemental analysis indicates that nonprofit managers act less conservatively than other industries.