Who Blows the Whistle on Corporate Fraud?

To identify the most effective mechanisms for detecting corporate fraud we study all reported fraud cases in large U.S. companies between 1996 and 2004. We find that fraud detection does not rely on standard corporate governance actors (investors, SEC, and auditors), but takes a village, including several non-traditional players (employees, media, and industry regulators). Differences in access to information, as well as monetary and reputational incentives help to explain this pattern. In-depth analyses suggest reputational incentives in general are weak, except for journalists in large cases. By contrast, monetary incentives help explain employee whistleblowing.