In “Whistleblower Rewards, False Reports, and Corporate Fraud”, Spagnolo, Buccirossi and Immordino develop a model of the interaction between rewards for whistleblowers, sanctions for fraudulently reporting false or fabricated information, judicial errors, and standards of proof in the two court cases: the one based on a whistleblower’s allegations and the potential follow-up case against a whistleblower accused of reporting false/fabricated information. The model is used to analyze the optimal law enforcement policy under various parameter configurations and efficiency levels of the legal system.

One of the findings is that an appropriate balance between the reward offered to successful whistleblowers, the sanctions against whistleblowers convicted for fabricating information, and the courts’ standards of proof, is essential for whistleblower policies to succeed. 

Interested in finding out more? Read the full paper here.