Using a proprietary data set from a provider of internal whistleblowing (WB) systems, we analyze nearly two million internal WB reports submitted to over 1,000 publicly traded U.S. firms. We provide descriptive statistics, over time and across report types, on the amount and summary details of information provided, how extensively management reviews reports, the amount of time until reviews were completed, and the outcome of these reviews. Further, we examine the characteristics of firms with more actively used systems (i.e., a higher volume of reports, more information provided in reports, and reports that are more frequently reviewed by management). Finally, we show that internal WB report volume is associated with fewer and lower amounts of government fines and material lawsuits.

This study documents the existence of local employment preferences for corporate executives and examines how the compensation of executives' local peers affects their own performance, risk-taking decisions, and financial reporting decisions. We find that external hires of new CEOs (CFOs) are five (eight) times more likely to be from local firms than non-local firms. We also find that local tournament incentives—as proxied by the pay gap between an executive and higher-paid executives in the area—are associated with stronger performance, greater risk taking, and more financial misreporting. We find consistent results using a difference-in-differences analysis that exploits plausibly exogenous variation in local tournament incentives caused by the sudden death of a local CEO. Our findings are consistent with executives taking actions to compete for a promotion to a nearby firm with higher pay.