Leaks, Disclosures and Internal Communication

40 Pages Posted: 13 Jul 2017 Last revised: 25 Mar 2024

See all articles by Snehal Banerjee

Snehal Banerjee

University of California, San Diego (UCSD) - Rady School of Management

Keri Peicong Hu

Faculty of Business and Economics, The University of Hong Kong

Taejin Kim

Korea University Business School

Date Written: November 9, 2017

Abstract

We study how increasing whistleblower incentives affect a firm’s communication decisions, price informativeness and real efficiency. An informed manager, who can divert cash for private benefit, privately communicates with his employee about project fundamentals and chooses investment. Given her information, the employee maximizes internal alignment and can leak the manager’s message with some noise. Stronger whistleblower incentives lead to more informative leaks, less misconduct and higher price informativeness. However, they can decrease firm value and real efficiency by increasing the manager’s manipulation of internal communication. More targeted policies (e.g., mandating more public disclosure) improve both price informativeness and real efficiency.

Keywords: leaks, whistleblower, disclosure, internal communication, efficiency

JEL Classification: D83, M14

Suggested Citation

Banerjee, Snehal and Hu, Keri Peicong and Kim, Taejin, Leaks, Disclosures and Internal Communication (November 9, 2017). Available at SSRN: https://ssrn.com/abstract=2999835 or http://dx.doi.org/10.2139/ssrn.2999835

Snehal Banerjee

University of California, San Diego (UCSD) - Rady School of Management ( email )

9500 Gilman Drive
Rady School of Management
La Jolla, CA 92093
United States

Keri Peicong Hu

Faculty of Business and Economics, The University of Hong Kong ( email )

Hong Kong
China
(852) 3910 2408 (Phone)

HOME PAGE: http://https://www.hkubs.hku.hk/people/keri-peicong-hu/

Taejin Kim (Contact Author)

Korea University Business School ( email )

145 Anam-Ro
Seongbuk-Gu
Seoul, 02841
Korea, Republic of (South Korea)

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