Corporate whistleblowing systems in the digital era: Determinants, effects, and disclosure

Abstract

Whistleblowing is a practice of communication between two parties that involves negative or sensitive information regarding potential misconduct in an organization. Due to the nature of the information involved in whistleblowing, whistleblowers can experience high levels of personal risk. They are often prevented from reporting or facing retaliation after communicating sensitive information. To minimize risk, companies may need to take the initiative to establish confidential and secure reporting channels. In practice, to deal with the challenges of providing better channels for whistleblowing, communication technology has been developed. One of the technological advancements in whistleblowing is web-based channels developed and administered by third parties. Additionally, the existence of social media can also contribute to whistleblowing practices. This thesis is based on four essays studying the topic of corporate whistleblowing channels. It discusses the issues of internal whistleblowing system adoption and disclosure, in which the determinants and effects are examined by considering technological advancements in whistleblowing. Using a sample of companies from the European Economic Area (EEA), this dissertation highlights the role of country peers as one of the determinants for companies to decide whether or not to adopt third-party web-based whistleblowing platforms. It also provides evidence suggesting that the introduction of whistleblowing systems—especially web-based platforms—potentially affects external auditors’ perceptions, as reflected by their audit pricing decisions. Moreover, the implementation of the platforms may also lead to corporate disclosure regarding the occurrence of internal whistleblowing reports, which further results in the use of a substantive approach to legitimize the incidents. Lastly, regarding the use of social media, it is found that when employees post more negative information about their employers online, the companies tend to legitimize their internal communication channels through non-financial disclosure.