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The Department of Justice as a gatekeeper in whistleblower-initiated corporate fraud enforcement: Drivers and consequences

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  • Heese, Jonas
  • Krishnan, Ranjani
  • Ramasubramanian, Hari

Abstract

We examine drivers and consequences of U.S. Department of Justice (DOJ) oversight of whistleblower cases of corporate fraud against the government. We find that the DOJ is more likely to intervene in and conduct longer investigations of cases that have a higher chance of victory and yield greater monetary proceeds, indicating that DOJ enforcement is influenced by its performance measures. DOJ intervention also affects the firm- and aggregate-level fraud environment. Firms subject to DOJ intervention improve their employee relations, internal controls, and board independence, and experience lower future whistleblowing risk. Whistleblowers avoid courts and agencies with low DOJ intervention rates. In contrast, we do not find that cases pursued by whistleblowers alone affect firms' or whistleblowers' behavior, suggesting that public enforcement through DOJ intervention has a greater deterrent effect on fraud than private enforcement by whistleblowers acting alone.

Suggested Citation

  • Heese, Jonas & Krishnan, Ranjani & Ramasubramanian, Hari, 2021. "The Department of Justice as a gatekeeper in whistleblower-initiated corporate fraud enforcement: Drivers and consequences," Journal of Accounting and Economics, Elsevier, vol. 71(1).
    • Handle: RePEc:eee:jaecon:v:71:y:2021:i:1:s0165410120300598
    DOI: 10.1016/j.jacceco.2020.101357
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    Cited by:

    1. Donelson, Dain C. & Kubic, Matthew & Toynbee, Sara, 2024. "The SEC's September spike: Regulatory inconsistency within the fiscal year," Journal of Accounting and Economics, Elsevier, vol. 77(2).
    2. Godsell, David & Huang, Kelly & Lao, Brent, 2023. "Managers’ rank & file employee coordination costs and real activities manipulation," Accounting, Organizations and Society, Elsevier, vol. 107(C).
    3. Nan, Lin & Tang, Chao & Zhang, Gaoqing, 2024. "Whistleblowing bounties and informational effects," Journal of Accounting and Economics, Elsevier, vol. 77(1).
    4. Chao Fu & Xiuyuan Deng & Hongfei Tang, 2023. "Who cares about corporate fraud? Evidence from cross-border mergers and acquisitions of Chinese companies," Review of Quantitative Finance and Accounting, Springer, vol. 60(2), pages 747-789, February.
    5. Daniel CONSTANTIN & Marius Silviu CULEA & Nicoleta CRISTACHE, 2022. "Internal Managerial Control – Perspectives on Some Modern Methods of Reducing the Risk of Fraud in Public Administration," Economics and Applied Informatics, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, issue 2, pages 27-35.

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    More about this item

    Keywords

    Whistleblowing; Department of Justice; DOJ Enforcement; Performance measures; False Claims Act;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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