An Experimental Approach for the Study of Effective Compliance and Integrity Measures Improving Whistleblowing Behaviors

• Applicant: Dr. Behnud Mir Djawadi
• Subject Area: Accounting and Finance ; Economic Policy, Applied Economics
• Term: from 2017 to 2021
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 389481270

Even though whistleblowing is now widely recognized as an important approach to prevent and detect corporate fraud there is a growing interest how organizations have to develop and align whistleblowing procedures and institutions within their corporate governance system to encourage employees to report unethical business practices.The objective of this research project is to investigate how corporate ethics programs have to be refined to encourage employees to report observed wrongdoing. Although the vast majority of organizations have been following guidelines of different regulatory initiatives for effective compliance and integrity management there is only limited knowledge to what extent specific characteristics of these programs influence employees behaviors to blow the whistle. Consequently, ethics programs which are enrolled without alignment of its components may fail to promote whistleblowing behaviors and be perceived as mere window-dressing to reduce the legal liability of the organization.Besides the few conceptual works on organizational ethics programs in general, the current empirical research based on observational field data is scarce on the effectiveness of ethics programs on whistleblowing and further lacks the ability to compare the effectiveness of different institutions and policies on whistleblowing within the same environmental setting. We therefore propose the use of experimental economics as the methodological approach for our research. By mainly using the experimental design of Bartuli, Mir Djawadi and Fahr (2016), we are able to control decision environments in ways that are hard to duplicate with the use of naturally occurring settings. This control allows for the testing of precise predictions derived from game-theoretic and (behavioral-) economic models. Moreover, whereas existing ethics institutions might be adopted endogenously due to strategic considerations by the top management, we are able to exogenously change and manipulate these institutions under controlled conditions. Thus, we can design the counterfactual situations needed for causal inferences of specific policies on whistleblowing which otherwise are impossible to observe or construct in the field. The research project is divided into four subprojects. First, it is planned to create a baseline setting in which the inclination to blow the whistle is investigated in two different organizational climates without any further interventions of compliance-based and integrity-based ethics programs. In the second and third subproject, different compliance-based and integrity-based ethics interventions are designed and incorporated into the baseline setting to examine their effectiveness on whistleblowing behavior, respectively. In the final subproject, we use the insights of the preceding subprojects to combine different compliance-based and integrity-based ethics interventions for studying joint effects on whistleblowing.

• DFG Programme: Research Grants