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The Deterrent Effect of Whistleblowing on Insider Trading

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  • Raleigh, Jacob

Abstract

I study whether the Dodd–Frank whistleblower program reduced informed trading by corporate insiders. To identify the effect, I partition firms based on the extent to which this program affected the likelihood of whistleblowing at each firm. I find a relative reduction in trading profits on purchases made by insiders at more affected firms after the program was initiated. I analyze insider sales in settings where they are more likely to be informed and find a reduction in the number of sales before negatively perceived events. The results suggest that whistleblower protections and rewards can effectively deter insider trading.

Suggested Citation

  • Raleigh, Jacob, 2024. "The Deterrent Effect of Whistleblowing on Insider Trading," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 59(8), pages 3739-3769, December.
    • Handle: RePEc:cup:jfinqa:v:59:y:2024:i:8:p:3739-3769_7
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