J Bus Ethics (2015) 126:8599

DOI 10.1007/s10551-013-2008-4

Whistleblowing Intentions of Lower-Level Employees: The Effect

of Reporting Channel, Bystanders, and Wrongdoer Power Status
Jingyu Gao Robert Greenberg Bernard Wong-On-Wing

Received: 15 January 2013 / Accepted: 29 November 2013 / Published online: 12 February 2014
Springer Science+Business Media Dordrecht 2014

Abstract It has been suggested that a reporting channel

administered by a third-party may represent a stronger
procedural safeguard of anonymity and avoids the appearance of impropriety. This study examines whistleblowing
intentions among lower-tier employees, specifically examines whether an externally-administered reporting channel
increases whistleblowing intentions compared to an internally-administered one. In contrast to the findings of an
earlier study by Kaplan et al. (Audit J Pract Theory
28(2):273288, 2009), our results suggest that whistleblowing intentions are higher when the reporting channel is
administered externally than when it is administered internally. We also find that an externally-administered reporting
channel mitigates the negative effect of bystanders on
whistleblowing intentions. Implications are discussed.
Keywords Whistleblowing
Bystander effect

Reporting channel
Sarbanes-Oxley

We are thankful for the valuable comments of participants at the

Waterloo 1st Biennial Symposium on Accounting Ethics, the 2012
ABO Meeting in Atlanta, and the 17th Annual Ethics Research
Symposium in Washington, DC.
J. Gao (&)
Renmin University of China, Beijing, China
e-mail: gaojingyu@rbs.org.cn
R. Greenberg
B. Wong-On-Wing (&)
Washington State University, Pullman, WA, USA
e-mail: wow@wsu.edu
R. Greenberg
e-mail: greenberg@wsu.edu

Introduction
Each year, Time magazine selects a Person of the
Yearthe individual whom it believes affected history
the most during that year. In 2002, the Person of the
Year consisted of three women who were whistleblowers
within large organizations: Enron, the FBI, and WorldCom.
The scandals following the reports of these whistleblowers
provided impetus for the United States Congress to pass the
Sarbanes-Oxley (SOX) Act (2002), which encourages
whistleblowing and provides protection from retaliation.
Since then, whistleblowing has continued to receive
increased attention, particularly given evidence of its relative importance in fraud detection compared to internal
controls or internal auditing. For example, the 2008 Report
to the Nation on Occupational Fraud and Abuse by the
Association of Certified Fraud Examiners (ACFE 2008,
p. 38) find that 46.2 % of frauds are initially detected by
tips provided by employees while internal audit detects
only 19.4 % and internal controls detect 23.3 %.Today,
additional protection and incentives for whistleblowers are
provided by the Dodd-Frank Wall Street Reform and
Consumer Protection Act (2010).
Although most frauds are perpetrated by upper management or from within the accounting department (ACFE
2008), other employees within the organization may also
have knowledge of the fraudulent activity. Moberly (2006,
p. 1108) notes, for example, that in the financial misconduct cases at many companies, including Enron, countless
lower-level employees necessarily knew about, were
exposed to, or were involved superficially in the wrongdoing and its concealment, but few disclosed it, either to
company officials or to the public. Apparently, a relatively large number of lower-level employees are exposed
to fraud, but remain silent.

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Consistent with the above observation, Mesmer-Magnus

and Viswesvaran (2005) find in their meta-analysis that
younger employees or those at a lower job level are
uncomfortable with reporting wrongdoing (particularly by
those at higher levels in the organizational hierarchy).
Those employees feel that they lack sufficient power to
blow the whistle and effect change. In contrast, consistent
with earlier studies, (e.g. Near and Miceli 1996; Miceli
et al. 1991a, b), Mesmer-Magnus and Viswesvaran (2005)
observe that employees of higher tenure and job level are
more likely to blow the whistle. They suggest that organizations should consider targeting lower-tier employees
for specific training, including communicating how reports
of wrongdoing might be made.
In the present study, we examine whistleblowing intentions specifically among lower-tier employees. We investigate the extent to which an externally administered
reporting channel increases whistleblowing intentions
compared to an internally administered one. It has been
suggested that a reporting channel administered by a thirdparty may represent a stronger procedural safeguard of
anonymity and avoids the appearance of impropriety (ACFE
2005; The Network 2006). Consequently, it should be
associated with higher levels of whistleblowing than an
internally administered reporting channel. Interestingly,
however, a study by Kaplan et al. (2009) unexpectedly finds
that reporting intention is greater when the reporting channel
is administered internally than when administered externally. Kaplan et al. (2009) speculate that their unexpected
finding may be attributable to the preference of executives
and upper management not to disclose fraud occurrences to
outsiders because of their concern about the reputation. In
the current study, we conjecture that to the extent that lowerlevel employees do not have the same perspective and
incentive as upper-level executives, they may be less concerned about the companys reputation. Instead, they may
focus on the anonymity of the reporting channel due to the
concern about possible retaliation. As a result, the claimed
benefit of an externally administered reporting channel may
be observed among lower-level employees.
In the present research, we first replicate the study of the
effect of reporting channel administration on whistleblowing intentions and test the generalizability of the
unexpected finding by Kaplan et al. (2009) among lowertier employees. We specifically seek to establish the extent
to which whistleblowing intention among those employees
is higher (or lower as in Kaplan et al. 2009) when the
reporting channel is administered externally than when it is
administered internally. We then extend the research by
examining the degree to which an externally administered
reporting channel can alleviate the negative effect of two
contextual factors on whistleblowing intentions: the presence of bystanders and high wrongdoer power status.

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The bystander effect, documented by Latane and Darley

(1968), suggests that the presence of other people will
inhibit ones intention to help. In the current context, it
means that compared to the situation in which a single
individual observes some wrongdoing, when more than one
person witnesses the wrongdoing, each individual will be
less likely to blow the whistle because according to the
diffusion of responsibility, perceived individual responsibility is decreased.
Wrongdoer power status can also reduce whistleblowing
intentions. Earlier studies (e.g., Cortina and Magley 2003;
Lee et al. 2004; Rehg et al. 2008) have shown that retaliation is more likely from individuals whose power status is
high. Given the higher likelihood of retaliation, whistleblowing intention can be expected to be lower when the
wrongdoing is perpetrated by high-level employees than
when it is performed by lower-level employees.
Participants in our study were undergraduate business
students from a state university in the US. They had limited
work experience and served as surrogate lower-tier
employees. To observe the influence of the three factors of
interest, we manipulated reporting channel administrator
(internal vs. external), presence of bystanders (absence vs.
presence of other bystanders), and wrongdoers power
status (supervisor vs. entry-level employee) between
subjects.
The results of our experiment suggest that lower-level
employees reporting intention is higher when the reporting
channel is administered externally by a third-party than
when it is administered internally. Moreover, the externally
administered reporting channel moderates the bystander
effect. In particular, when the reporting channel is administered internally, the reporting intention of a potential
whistleblower is significantly lower when there are other
bystanders compared to when there are no other bystanders. In contrast, whistleblowing intentions do not differ
significantly between the two conditions when the reporting channel is administered externally by a third-party. We
also find that lower-level employees whistleblowing
intention is significantly lower when the wrongdoer is a
supervisor than when s/he is a coworker. This effect is,
however, not significantly reduced by the use of an externally administered reporting channel.
Our research contributes to the whistleblowing literature
in several ways. First, our study provides evidence that
reporting channels administered externally may be more
effective than those administered internally in promoting
whistleblowing among lower-tier employees. Our study
thus complements that of Kaplan et al. (2009), who find
opposite results using participants in a management role.
Together, the results of the two studies provide evidence
consistent with the notion that lower-tier employees may
not be as concerned as upper management about disclosing

Whistleblowing Intentions of Lower-Level Employees

fraud occurrences to outsiders. This presents an interesting

dilemma. The issue is, however, in practice; companies can
balance the need to detect fraud and the importance of
protecting the companys reputation. Second, we find a
bystander effect that negatively impacts whistleblowing
intentions. Moreover, results of our path analysis provide
evidence consistent with the theory of diffusion of
responsibility. This outcome is opposite of the findings by
Robinson et al. (2012). We conjecture that possible
explanations for this inconsistency may be differences in
the design, participants and data collection procedures
between the two studies. Third, we find that the negative
effect of bystanders is moderated by the use of an externally administered reporting channel. This result provides
further evidence of the difference in effectiveness between
internally and externally administered reporting channels
in promoting whistleblowing.
The remainder of this paper is organized as follows. The
next section provides background information and develops the hypotheses. The third section describes the research
method and the fourth section reports the results of the
study. The implications of the findings as well as the
limitations of the current study are discussed in the final
section.

Background and Hypotheses

Whistleblowing
Since the scandals at Enron, the FBI, Worldcom, and other
organizations, whistleblowing has received growing
attention from the public and academia. Research has
examined both determinants of individuals whistleblowing
as well as other aspects of the phenomenon, such as steps in
making whistleblowing decisions (Vandekerckhove and
Lewis 2012; Lewis and Kender 2010), the correlation
between whistleblowing intention and actual behavior
(Mesmer-Magnus and Viswesvaran 2005) and perceived or
actual retaliation following whistleblowing (e.g. MesmerMagnus and Viswesvaran 2005; Rehg et al. 2008).
A significant amount of research has focused on factors
that impact individuals intention to blow the whistle. It has
been documented that people in an organization are more
likely to report unethical or illegal issues if they have better
job performance reviews, better education, superior positions compared to the wrongdoer, and higher scores in
moral judgment tests (e.g. Brabeck 1984; Chiu 2003; Miceli and Near 1984; Near and Miceli 1996; Sims and
Keenan 1998). Potential whistleblowers demographic
information, such as gender, may also play a role in the
decision making process. For example, Kaplan et al. (2008)
indicate that when an anonymous reporting channel is

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available, males and females differ in their judgments

regarding the reduction in personal costs of an anonymous
reporting channel compared to a non-anonymous reporting
channel.
The effects of contextual and organizational attributes
on company employees willingness to blow the whistle
have also been studied (e.g. Keenan 1995; King 1999;
Kaptein 2011). For example, perceived organizational
justice (Seifert et al. 2010), the supervisors support (Sims
and Keenan 1998), the organizations propensity to
encourage whistleblowing (Mesmer-Magnus and Viswesvaran 2005) and public industry type (Perry and Wise
1990) are strongly and positively related to employees
intention to report fraud. Furthermore, employees are more
willing to blow the whistle when it is encouraged by the
general organizational climate. An ethical organization
culture consists of many aspects, including integrating
ethics in decision making processes, establishing a compensation system that rewards ethical behavior, and setting
a tone that allows employees to question obedience of
authority (Rothwell and Baldwin 2006; Trevino et al.
1999). Not surprisingly, whistleblowers tend to report
externally when the organizational context seems unfavorable (Miceli and Near 1992). Blowing the whistle
externally has also been found to be positively associated
with the supervisors support, as well as informal and
formal company policies that encourage external whistleblowing (Sims and Keenan 1998). Additionally, compared
to internal whistleblowers, those who report to an external
recipient tend to provide more convincing evidence with
which to support their allegations of wrongdoing (Dworkin
and Baucus 1998).
In the present study, we posit that relative to an internally administered reporting channel, one that is externally
administered can enhance whistleblowing among lowerlevel employees. We also hypothesize that an externally
administered reporting channel can alleviate the negative
effect on whistleblowing intentions of two contextual factors: the presence of bystanders and high wrongdoer power
status. Below we develop our hypotheses.
Reporting Channel
After observing that someone is engaged in wrongdoing,
employees may report it to the wrongdoers supervisor or
to someone who has the authority to investigate, detect, or
terminate the wrongdoing. However, under this normal
face-to-face reporting, perceived personal cost will be
higher compared to when the reporting is anonymous
(Ayers and Kaplan 2005). Consequently, face-to-face
reporting of wrongdoing can be expected to be low relative
to anonymous reporting. Surveys of employees provide
evidence of this. For example, The Network (2010) found

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that in 2009, 71 % of the participants did not directly notify

management of an observed questionable issue. Similarly,
the Ethics Resource Center (2007) found that 42 % of
employees who observed misconduct remained silent.
More than half indicated that they did so because they
would have had to report to the person involved or because
they were not aware of the availability of an anonymous
reporting channel. These findings indicate that an anonymous reporting channel may be able to effectively detect
fraud or even potentially prevent fraud.
The SOX Act of (2002) requires the audit committee of
companies to establish whistleblowing procedures whereby
employees can anonymously submit issues of concern
regarding questionable accounting or auditing. However,
there is no detailed guideline about how to administer an
anonymous reporting channel. Within publicly-traded
companies, the SEC allows audit committees broad discretion regarding policies and procedures for anonymous
reporting channels. Therefore, the effectiveness and confidentiality of an anonymous reporting channel may vary
depending on how it is administered.
Corporations can operate their anonymous reporting
channels in-house within their Department of Internal
Audit or Department of Human Resource (Kaplan et al.
2009). In an investigation of ethics programs in Fortune
500 service and industrial firms, Weaver et al. (1999) find
that Human Resources (HR) is ultimately responsible for
ethics/compliance management in 28 % of responding
firms, while legal and audit staff are taking a more prominent role (Weaver and Trevino 2001). Apparently, the role
of HR in companies ethics management is relatively minor
(Weaver and Trevino 2001). On the other hand, the
Department of Internal Audit has a unique role within the
organization, with close relationship to both senior management and the audit committee. Thus it is a natural outlet
for potential whistleblowers (PricewaterhouseCoopers
2004; Read and Rama 2003). However, from the employees perspective, the internal audit is not a preferred
reporting channel, especially when social confrontation
occurs (Kaplan et al. 2010).
Companies can also utilize a reporting system maintained by an independent third-party provider which is
considered to provide stronger procedural safeguards
including high confidentiality, trained professionals, and an
effective investigation process afterward (Kaplan et al.
2009). According to Trevino et al. (1999), a number of US
companies outsource their telephone hotlines to outside
consultants or security companies in distant cities. Fifteen
percent of members of the Ethics Officers Association
(EOA) outsource their reporting system. Another nineteen
percent have a hybrid (internal/outsourced) system. Professional organizations (e.g. ACFE 2005; The Network
2006) indicate that a hotline administered by a third party

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represents a strong procedural safeguard and provides

many benefits. One important benefit is that an independent
third-party can provide greater protection of anonymity,
especially for smaller companies. The reason is that in
those small-size organizations, everyone knows each other
and thus, it is particularly difficult to guarantee confidentiality and anonymity. Furthermore, outsourcing the
reporting hotline can not only be less expensive for companies, but it can also insure that issues are treated professionally and quickly.
Based on the above, compared to an internally administered reporting channel, one that is administered externally should be perceived to be more reliable in protecting
the anonymity of individuals who disclose fraudulent
behavior. This in turn should reduce individuals perceived
personal cost of whistleblowing including that associated
with the risk of retaliation. As a result, whistleblowing
should be more likely when the reporting channel is
administered externally than when administered internally.
Thus, our first hypothesis is stated as follows:
H1 After observing a fraudulent act, employees intention to blow the whistle will be greater when the companys anonymous reporting hotline is administered
externally by a third-party than when it is administered
internally by the company.
Bystander Effect
The bystander effect (Latane and Darley 1968, 1970)
occurs when bystanders are less likely to intervene because
other people are present. In the current context, the
bystander effect suggests that an individual would be less
likely to blow the whistle when s/he is aware that others
have witnessed a wrongdoing. For example, Dozier and
Miceli (1985) and Graham (1986) find that individuals are
less likely to blow the whistle when many organizational
members could have observed the wrongdoing. Similarly,
Miceli et al. (1991a, b) note that internal auditors are more
likely to blow the whistle through an external reporting
channel when there are few observers. As described below,
we posit that the bystander effect will influence whistleblowing intention via individuals perception of personal
responsibility and perceived personal cost in the form of
openness to blame and evaluation apprehension.
Diffusion of responsibility has been used to explain the
bystander effect phenomenon. Responsibility is typically defined in terms of openness to blame. Discussion of
the decision process associated with aiding has often
focused on the costs (and rewards) of either helping or not
helping (e.g. Latane and Darley 1970; Piliavin and Piliavin
1972). When one is alone, one is the sole object of blame
from others if the emergency results in a tragedy. Thus,

Whistleblowing Intentions of Lower-Level Employees

perceived personal responsibility and the cost to oneself of

failing to intervene may be high. When many are present,
however, the potential for blame is more diffused. Consequently, perceived personal responsibility and the cost of
failing to intervene is less for any given individual. When
perceived personal responsibility is lower and nonintervention has less cost, intervention is less likely to occur.
The bystander effect phenomenon can also be explained
in terms of cost in the form of evaluation apprehension. If
bystanders believe that others are aware of their presence,
the bystanders may be apprehensive regarding others
expectations and evaluations, and thus seek to optimize
these evaluations. Latane and Darley (1970) have called
this process audience inhibition, whereas Schwartz and
Gottlieb (1976) have adopted the label evaluation apprehension, because they reason that concern with others
evaluations may enhance as well as inhibit helping. When
wrongdoing is observed by a single individual, s/he is less
likely to be apprehensive about others evaluations and
expectations, since no one else is aware of her/his action. In
contrast, concern about others evaluation and reaction
would be high if other bystanders are present.
In summary, in the case of offering help to victims in an
emergency situation, the responsibility and cost for nonintervention would be higher when the observer is alone
than when there are several onlookers, since in the latter
case, the responsibility and cost for nonintervention are
shared. In contrast, negative consequences (e.g., getting the
cold shoulder from the boss and co-workers, retaliation) to
whistleblowers may arise from their intervention instead of
their non-intervention. Moreover, the responsibility and
cost for intervention would be higher when there are several witnesses than when the whistleblower is the only one
to know about the wrongdoing. Thus, consistent with the
bystander effect, an employee is more likely to blow the
whistle when there are no bystanders than when others are
present. Interestingly, a recent study by Robinson et al.
(2012) finds the opposite of the bystander effect. We reexamine and predict the bystander effect using a homogeneous student participant sample and a between-subject
design, instead of participants from diverse backgrounds
and a within-subject design as employed in that study.
Anonymity vis-a-vis the other bystander has been found
to affect helping, apparently by reducing evaluation apprehension (Schwartz and Gottlieb 1980). As noted earlier, in
the current context, the potential whistleblower is likely to
perceive personal blame to be higher when others have
witnessed the wrongdoing than when the whistleblower is
alone to have witnessed it. Thus, s/he will be less likely to
blow the whistle when others are present. We posit that the
benefit of an external reporting channel on whistleblowing
intentions (predicted in H1) will be more significant when
others are present than when the whistleblower is alone to

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observe the wrongdoing. This is because when personal

blame is perceived to be high due to the presence of others,
providing a better guarantee of anonymity through an
externally administered reporting channel can significantly
lower perceived personal cost including the likelihood of
retaliation. The effect on whistleblowing intentions should
similarly be significant. In contrast, when the whistleblower
is the only observer of the wrongdoing, the increased
assurance of anonymity afforded by an externally administered reporting channel is expected to have a less significant
effect on perceived personal cost and thus, whistleblowing
intentions. Accordingly, we predict the following:
H2 The positive effect of an externally administered
reporting channel on employees whistleblowing intention
will be more significant when wrongdoing is observed in
the presence of bystanders than when it is observed in the
absence of bystanders.
Wrongdoer Power Status
The wrongdoers power status can also influence whistleblowing intention via perceived seriousness and personal
cost. It is often measured in terms of the wrongdoers
position in the organization, which reflects bases of power
or the dependence of the organization on the individual
(Miceli et al. 2008). Perceived seriousness can thus be
inferred from the power status of the wrongdoer, which
may indicate information about the amount and/or the
extent of the damages or losses associated with the
wrongdoing. We propose that one way in which wrongdoers power status may influence whistleblowing intention
is through the perceived seriousness of the wrongdoing.
In addition, previous studies (see Cortina and Magley
2003; Lee et al. 2004; Rehg et al. 2008) find that the more
powerful the wrongdoer, or the more dependent the organization is on the wrongdoer, the more retaliation will be
directed toward the whistleblower, ceteris paribus. Since
retaliation is an important component of personal cost, the
potential whistleblower is likely to perceive personal cost
to be higher when the power status of the wrongdoer is
high than when it is low. Because of the perceived higher
cost, we propose that a potential whistleblower will be
more concerned about anonymity, and thus, be less likely
to blow the whistle when the power status of the wrongdoer
is high than when it is low. We further posit that the benefit
of an external reporting channel on whistleblowing intentions (predicted in H1) will be more significant when the
wrongdoers power status is high than when it is low. This
is because when the personal cost is perceived to be high
due to the high power status of the wrongdoer, providing a
better guarantee of anonymity through an externally
administered reporting channel can significantly lower the

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likelihood of retaliation and the associated cost. The effect

on whistleblowing intentions should similarly be significant. In contrast, when power status is low, the perceived
personal cost is already relatively low given that the likelihood of retaliation is low, compared to when power status
is high. The increased assurance of anonymity afforded by
an externally administered reporting channel is expected to
have a less significant effect on the likelihood of retaliation
and thus, whistleblowing intentions. Accordingly, we predict the following:
H3 The positive effect of an externally administered
reporting channel on employees whistleblowing intention
will be more significant when the power status of a
potential wrongdoer is high than when it is low.

J. Gao et al.

A: fictitious supplier), the fraudster approves payment of a

fake invoice for a fictitious supplier. In the second case
(case B: qualification fee), the fraudulent employee
requires payment of a fee to his personal account for a
supplier to qualify for a bid. Within each case, the number
of bystanders and the power status of the wrongdoer were
manipulated (see Independent Variables section). After
reading each case, participants were asked to indicate the
probability that the would-be whistleblower would call the
hotline to report the wrongdoing. At the end of the task,
participants responded to manipulation check questions
and provided demographic information.
Independent Variables
Reporting Channel Administration

Methods
Design
We employed a 2 (reporting channel) 9 2 (bystander) 9 2
(power status) 9 2 (case) design, fully crossing the
reporting channel administration (internal vs. external), the
number of bystanders (no other bystander vs. two other
bystanders) and the wrongdoers power status (supervisor
vs. entry-level employee) between subjects. Moreover,
since each participant evaluated two cases (fictitious supplier case and qualification fee case), case is a withinsubject factor.
Participants
A total of 369 business students at a US public university
participated in the study. They served as surrogate low-tier
employees. Their average age was 20.5 years (s.d. = 2.72)
and 57 % were male. Over 75 % of the participants
reported having work experience. The average work
experience was 3.5 years (s.d. = 2.23). These demographic factors do not differ significantly (p [ 0.10) across
experimental groups.
Task
Participants were provided with information about a
hypothetical company, High Energy Corporation (hereafter
HEC). We included excerpts from its Code of Ethics to
communicate the availability of an anonymous reporting
channel and enable the manipulation of the channel
administration factor. Every participant then read two
independent case scenarios, which each described an
employee faced with a whistleblowing decision after
becoming aware of a fraudulent act. In the first case (case

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In the internal administration condition, participants were

told that HECs reporting hotline is operated by the companys Department of Internal Audit. Participants in the
external administration condition were told that the
reporting hotline is operated by an independent third party
named Compliance Expert Co., Ltd., that is located in New
York, NY, USA. Other details regarding the reporting
hotlines (e.g., availability 24 h a day, 7 days a week) were
identical across both conditions.
Presence of Bystanders
We manipulated the presence versus absence of bystanders
(other than the potential whistleblower) in each of the two
cases as follows. In the fictitious supplier case, the wouldbe whistleblower becomes aware of the wrongdoing when
one late evening at the office, he overhears a phone conversation (about the fake invoice) between the fraudster
and his accomplice. In the bystander present condition, the
potential whistleblower also hears two coworkers talking
about the wrongdoing after the fraudster leaves. In the
bystander absent condition, the two coworkers are not
mentioned.
In the qualification fee case, the would-be whistleblower
learns about the fraud when he goes to the copy room and
finds a printed copy of the fraudsters letter to the prospective supplier requesting the prohibited fee. In the
bystander present condition, the potential whistleblower
sees two other employees reading the letter when they go to
the copy room. In the bystander absent condition, the other
two employees are not mentioned.
Wrongdoer Power Status
The manipulation of wrongdoer power status was effected
in the two cases as follows. In the high power status

Whistleblowing Intentions of Lower-Level Employees

condition, the wrongdoer was described as the observers

supervisor in case A, and as a purchasing manager in case
B. In the low power status condition, the wrongdoer was
described as an entry-level employee in both case A and
case B.
Dependent Variable
The primary dependent variable is the whistleblowing
intention using the available hotline. Participants were
asked to assess the probability (from 0 to 100 %) that the
potential whistleblower would call the hotline to report the
wrongdoing. Previous research (e.g. Cohen et al. 1998,
2001; Chung and Monroe 2003) indicates that social
desirability bias is more likely when behavior intention
items are phrased in the first person than when phrased in
the third person. Therefore, we phrased the question in the
third person and asked participants to indicate the target
persons intention to report the potential wrongdoing.

Results
Manipulation and Other Checks
We first verified whether the study participants perceived
our three manipulations as intended. To that end, they were
asked in the last section of the research instrument:
(i) whether the hotline was operated by the companys
Department of Internal Audit or by an independent thirdparty company; (ii) whether the would-be whistleblower
was the only employee aware of the wrongdoing; and (iii)
whether the presumed wrongdoer was an entry-level
employee or a supervisor.
Of the 369 participants, 96 (26 %) failed at least one
manipulation check: 52 participants failed the manipulation
check for Reporting Channel, 38 failed the bystander
manipulation check, and 47 failed the manipulation check
for wrongdoers power status. Note that some participants
failed more than one manipulation check. Data from the
remaining 273 participants are used for testing the
hypotheses.
For each of the two reporting channel administration,
participants were also asked to indicate using a 7-point
likert scale (1 = Not at all confident, 7 = Extremely
Confident), how confident they were that their anonymity
would be guaranteed if they report wrongdoing. Consistent
with our expectation, the reporting channel administered by
an independent third party (5.47) was perceived to better
protect a reporters anonymity than that maintained by the
companys Department of Internal Audit (4.18) (t = 8.70,
p = 0.000, 2-tailed).

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Tests of Hypotheses
To test our hypotheses, a 2 (reporting channel) 9 2
(bystander) 9 2 (power status) 9 2 (case) ANOVA was
performed with whistleblowing intention as the dependent
variable.1 Case is a within-subject factor. The results are
presented in Table 1.
H1 Our first hypothesis predicts that an individuals
intention to report a fraudulent act using an anonymous
reporting hotline will be greater if it is administered by a
third-party than if it is maintained by the companys own
Department of Internal Audit. Table 1 shows a significant
(F (1, 271) = 7.5, p = 0.007) reporting Channel main
effect on whistleblowing intention. As shown in Table 2,
whistleblowing intention is higher under the externally
administered reporting channel (58.4, s.d. = 17.3) than
under the internally administered reporting channel (52.2,
s.d. = 19.2). These results are consistent with H1.
H2 Our second hypothesis predicts an interaction between
reporting channel administration and the number of
bystanders on whistleblowing intentions. As shown in
Table 1, the predicted interaction between the two factors is
significant (F (1,271) = 3.688, p = 0.056). To further
investigate this finding and understand the nature of this
interaction, we perform simple effects tests. The results are
shown in Table 2. In the no bystander situation, the difference in means of whistleblowing intention between internal
reporting channel administration (54.9, s.d. = 16.5) and
external reporting channel administration (57.5, s.d. = 17.6)
is not statistically significant (t = -0.086, p = 0.196, onetailed). However, in the bystander situation the mean of
whistleblowing intention under the externally administered
reporting channel (59.4, s.d. = 16.8) is significantly higher
(t = -2.96, p = 0.0018, one-tailed) than that under the
internally administered reporting channel (49.8, s.d. =
21.2). This pattern of results is consistent with H2.
H3 Our third hypothesis predicts an interaction between
reporting channel administration and the power status of the
wrongdoer on whistleblowing intentions. As shown in
Table 1, the interaction between reporting channel administration and wrongdoer power status is not significant
(p = 0.91). The mean difference in whistleblowing intention
between high and low wrongdoer power status is not significantly different between internal (6.99) and external

We replicated the ANOVA omitting the wrongdoer power

status 9 bystander interaction and the three-way interaction as these
interactions are not hypothesized. The resulting hypothesis tests and
significance levels are nearly identical to those in Table 1. In addition,
we performed an ANCOVA with gender as a covariate. Gender is
omitted from the analysis as it is not statistically significant.

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92
Table 1 ANOVA for the effect
of reporting channel
administration, bystander, and
wrongdoer power status on
whistleblowing intention

J. Gao et al.

Source

SS

df

MS

p value

Casea

4,768

4,768

15.27

0.000

Case 9 reporting channel administration

30.98

30.98

0.099

0.753

Case 9 wrongdoer power status

46.82

46.82

0.15

0.699

Case 9 bystander

3048.9

3048.9

9.76

0.002

Case 9 reporting channel administration 9 wrongdoer power

status

105.7

105.7

0.338

0.561

Within-subjects effects

Case 9 reporting channel administration 9 bystander

22.39

22.39

0.072

0.789

Case 9 wrongdoer power status 9 bystander

32.1

32.1

0.103

0.749

Case 9 wrongdoer power status 9 bystander 9 reporting

channel administration

30.9

30.9

0.099

0.753

4772.7

4772.7

7.5

0.007

Wrongdoer power status

6073.1

6073.1

9.52

0.002

Bystander

553.1

553.1

0.867

0.353

Reporting channel administration 9 wrongdoer power status

8.38

8.38

0.013

0.909

Between-subjects effects
Reporting channel administration

Fictitious supplier case (case

A) and qualification fee case
(case B)

Reporting channel administration 9 bystander

2353.4

2353.4

3.688

0.056

Wrongdoer power status 9 bystander

825

825

1.293

0.257

Wrongdoer power status 9 bystander 9 reporting channel

administration

606.6

606.6

0.950

0.330

(6.28) reporting channel administration. These results do not

support H3.
Supplemental Analyses
Interaction of Bystander and Case
Results of the test of within-subjects effects in Table 1
indicate a significant interaction between case and
bystander (F (1,269) = 9.76, p = 0.002). After conducting simple effects tests (results are shown in Table 3),
we find that the bystander effect on whistleblowing
intention is significant in the qualification fee case (mean
differenceno-bystanderbystander = 6.6, t = 2.33, p = 0.0102,
one-tailed). Interestingly, the opposite effect is obtained in the
fictitious supplier case (mean differenceno-bystanderbystander =
-3.3, t = -1.29, p = 0.0978, one-tailed). We speculate on
this unexpected finding in the Discussion section.
Test of Mediation
To provide insights into how our three manipulated factors
(reporting channel administration, bystander, and wrongdoers power status) influence reporting intentions, we test
the effect of three mediating variables theorized by Schultz
et al. (1993). Their theoretical model depicts whistleblowing intentions of individuals as a function of three
assessments: perceived seriousness of questionable act,
perceived personal cost of reporting, and perceived personal responsibility for reporting.

123

For each case scenario, our research instrument included three questions, one each related to participants perceptions of the seriousness of the observed fraudulent act,
the personal cost of reporting the fraud, and the perceived
responsibility for reporting it. We, respectively, asked
participants the extent to which they agreed that the
potential whistleblower is likely (i) to judge that the fraud
is totally unacceptable; (ii) to be extremely concerned that
if he reports the potential wrongdoing, the fraudster might
find out and try to harm him; and (iii) to count on someone
else to report the potential wrongdoing. All responses were
recorded on a 7-point likert scale (7 = completely agree,
1 = completely disagree). To be consistent with the coding of the seriousness and personal cost measures,
responses to the responsibility measure (third item) was
reverse-coded.
To test the effect of the theorized mediators, we conducted path analysis using Mplus. Because Case is a significant factor based on the ANOVA results shown
previously, we conduct separate path analyses for the fictitious supplier case and the qualification fee case. The
results of the analyses are presented in Fig. 1 and Table 4.
In each case, the model fits the data well (fictitious supplier
case: v2 = 12.80, CFI = 0.94, RMSEA = 0.06, SRMR =
0.04; qualification fee case: v2 = 17.98, CFI = 0.94,
RMSEA = 0.08, SRMR = 0.05). The mediating roles of
perceived responsibility and perceived personal cost of
reporting can be observed. Specifically, the presence of
bystanders decreases whistleblowing intention through
reduced perceived personal responsibility. Similarly, a

Whistleblowing Intentions of Lower-Level Employees

93

Table 2 Effect of reporting channel administration and bystander on whistleblowing intention

Panel A: cell means
Reporting channel administration

Total

Department of Internal Audit

Third party

54.9 (16.5) N = 66

57.5 (17.6) N = 67

56.2 (17.0) N = 133

49.8 (21.2) N = 70

59.4 (16.8) N = 70

54.6 (19.7) N = 140

52.2 (19.2) N = 136

58.4 (17.3) N = 137

Bystander
No bystander
Bystander
Total
Panel B: planned comparisons
df

p value (one-tailed)

Effect of reporting channel administration in no bystander situation

131

-0.86

0.1960

Effect of reporting channel administration in bystander situation

138

-2.96

0.0018

Effect of bystander in Department of Internal Audit reporting channel administration

134

1.57

0.0595

Effect of bystander in a third party reporting channel administration

135

-0.65

0.2599

Panel C: figure of means (interaction effect of reporting channel administration and bystander)

Whistleblowing intention is equal to the average of whistleblowing intention in two cases

powerful wrongdoer decreases employees whistleblowing

intentions through increased perceived personal cost. Following Preacher and Hayes (2008), multiple mediators
analysis was performed for each case (see Tables 5, 6) to
provide further evidence of mediation.2 The results are
presented below.

Advantages to specifying and testing a single multiple mediation

model in lieu of separate simple mediation models are: (1) it is
possible to determine the significance of a specific mediator,
conditional on the presence of other mediators in the model; (2) it
is possible to include multiple mediators in one model to allow the
test of competing theories; and (3) in a single multiple mediation
model, the likelihood of parameter bias due to omitted variables is
reduced (Preacher and Hayes 2008).

Bystander Effect
We expected that the bystander effect would decrease
participants whistleblowing intention through increased
perceived personal cost and decreased perceived personal
responsibility. In the fictitious supplier case (case A, see
panel A in Table 5), we find that the total indirect effect is
statistically significant (Z = -4.303, p \ 0.000), although
a significant total indirect effect is not a prerequisite for
investigating specific indirect effects. Assuming normality,
the results suggest that the separate indirect effect of perceived personal responsibility (Z = -4.422, p \ 0.000) is
significant. The normal theory tests for indirect effects
compute the standard errors using the delta method, which
assumes that the estimates of the indirect effect are normally distributed. To relax this assumption, bootstrap test

123

94

J. Gao et al.

Table 3 Effect of bystander and case on whistleblowing intention

Panel A: cell means
Bystander

Total

No bystander

Bystander

56.7 (20.1) N = 133

60 (21.8) N = l40

58.4 (21.0) N = 273

55.7 (22.4) N = 133

49.1 (16.8) N = l40

52.3 (23.5) N = 273

56.2 (17.0) N = 266

54.6 (19.7) N = 280

Case
Fictitious supplier case (case A)
Qualification fee case (case B)
Total
Panel B: planned comparisons
df

p value (one-tailed)

Effect of bystander in fictitious supplier case (case A)

271

-1.29

0.0978

Effect of bystander in qualification fee case (case B)

271

2.33

0.0102

Panel C: figure of means (interaction effect of bystander and case)

results are also reported. They indicate that only Perceived

Personal Responsibility is a mediator, as its 95 % confidence interval does not contain zero (-9.150 to -3.718).
However, perceived personal cost does not significantly
mediate the influence of bystander on participants whistleblowing intention.
Similarly, in the qualification fee case (case B), as shown
in panel A in Table 6, the total indirect effect is statistically
significant (Z = -4.454, p \ 0.000). Of the two proposed
mediators, only Perceived Personal Responsibility is statistically significant (Z = -5.130, p \ 0.000). The results
from the bootstrapping test demonstrate the same pattern. In
particular, perceived personal responsibility is a significant
mediator, as its 95 % confidence interval does not contain
zero (-11.631 to -5.147). In summary, we find that perceived personal cost does not significantly mediate the effect
of bystander on participants whistleblowing intention, but
the mediation role of perceived personal responsibility is
supported.

123

Wrongdoer Power Status

We expected that wrongdoer power status would influence
participants whistleblowing intention through perceived
personal cost and perceived seriousness. In the fictitious
supplier case (case A), as shown in panel B in Table 5, the
total indirect effect is statistically significant (Z = -1.946,
p \ 0.052). The results also suggest that the separate
indirect effect of perceived personal cost (Z = -2.167,
p \ 0.030) is significant. Bootstrapping tests indicate that
only perceived personal cost is a significant mediator, as its
95 % confidence interval does not contain zero (-3.583 to
-0.434).
Similarly, in the qualification fee case (case B, see panel
B in Table 6), the total indirect effect is statistically significant (Z = -2.011, p \ 0.044). Among the two expected mediators, only perceived personal cost is statistically
significant (Z = -2.700, p \ 0.007). Again, the results
from the bootstrapping test indicate that perceived personal

Whistleblowing Intentions of Lower-Level Employees

95

Perceived Personal
Responsibility

-0.427** (-0.424**)

Bystander

0.326** (0.336**)
0.19** (-0.001)

0.018 (-0.099*)

-0.144** (-0.07)

Wrongdoer
Power Status
-0.013 (-0.027)
**

Whistleblowing
Intention
**

**

0.151 (0.389 )

Perceived
Seriousness

**

0.179 (0.228 )

Reporting
Channel
Administration

0.143** (0.097**)
-0.144** (-0.199**)
0.073 (0.21**)
0.026 (0.024)

Perceived
Personal Cost

Fig. 1 Results of path analyses. Fictitious supplier case (qualification

fee case). **Coefficients are significant at p \ .01; *coefficients are
significant at p \ .05. Coding of variables Reporting channel

administration: 1 = internal audit department, 2 = external thirdparty; bystander: 1 = no bystander, 2 = two other bystanders;
wrongdoer power status: 1 = entry level employee, 2 = supervisor

Table 4 Fit statistics for path analysis

C in Table 5). The results from the bootstrapping test also

indicate that perceived personal cost is not a significant
mediator, as its 95 % confidence interval contains zero
(-1.645 to 0.709). Therefore the mediation role of perceived personal cost is not supported in the fictitious supplier case (i.e. case A).
The same procedure was repeated in the qualification fee
case (i.e. case B). The results are similar to that of the
fictitious supplier case (see panel C in Table 6). Specifically, the indirect effect of perceived personal cost is not
significant (p = 0.646). In addition, its 95 % confidence
interval contains zero (-1.455 to 0.558). Thus, perceived
personal cost does not significantly mediate the effect of
reporting channel administration on participants whistleblowing intention.

Case

v2

CFI
(0.90.95)

RMSEA
(B0.08)

SRMR
(B0.06)

Fictitious supplier
case (case A)

12.80

0.05

0.94

0.06

0.04

Qualification fee
case (case B)

17.98

0.01

0.94

0.08

0.05

cost is a significant mediator, as its 95 % confidence

interval does not contain zero (-4.224 to -0.877).
In summary, we find that perceived seriousness does not
significantly mediate the effect of Wrongdoer Power Status
on participants whistleblowing intention. This is consistent with previous findings of (Kaplan and Whitecotton
2001) and those of Schultz et al. (1993) among their US
participants. However, our results provide evidence of the
mediating role of perceived personal cost on the link
between wrongdoer power status and participants whistleblowing intention.
Reporting Channel Administration
We next examine whether perceived personal cost mediates the effect of reporting channel administration on
participants whistleblowing intention. In the fictitious
supplier case (i.e. case A), perceived personal cost is not
statistically significant (Z = -0.390, p = 0.697, see panel

Discussion
As a result of recent corporate scandals, regulatory agencies, and the public have become more concerned about
organizational wrongdoing and ways to encourage whistleblowing. This study examines how the reporting channel
can influence whistleblowing intentions specifically among
lower-tier employees. Since audit committees have wide
discretion on how to administer their anonymous reporting
channel, investigating the effect of different reporting
channel administrations on employees whistleblowing

123

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J. Gao et al.

Table 5 Mediation analysis in fictitious supplier case (case A)

Table 6 Mediation analysis in qualification fee case (case B)

A. The effect of bystander on whistleblowing intention

A. The effect of bystander on whistleblowing intention

a. Normal theory tests for indirect effects

a. Normal theory tests for indirect effects

Effect

SE

Total

-6.275

1.458

-4.303

0.000

Total

Perceived personal cost

-0.177

0.393

-0.451

0.652

Perceived personal cost

Perceived personal responsibility

-6.097

1.379

-4.422

0.000

Perceived personal responsibility

b. Bias corrected and accelerated confidence intervals

Effect

SE

-7.642

1.716

-4.454

0.000

0.630

0.446

1.413

0.158

-8.272

1.613

-5.130

0.000

b. Bias corrected and accelerated confidence intervals

Lower

Upper

Total

-9.506

-3.583

Perceived personal cost

-1.153

0.542

Perceived personal responsibility

-9.150

-3.718

Total

Lower

Upper

-11.362

-4.127

Perceived personal cost

Perceived personal responsibility

-0.021

1.857

-11.631

-5.147

B. The effect of wrongdoer power status on whistleblowing intention

B. The effect of wrongdoer power status on whistleblowing intention

a. Normal theory tests for indirect effects

a. Normal theory tests for indirect effects

Effect

SE

Total
Perceived personal cost

-1.486
-1.393

0.764
0.643

-1.946
-2.167

0.052
0.030

Perceived seriousness

-0.093

0.447

-0.208

0.835

b. Bias corrected and accelerated confidence intervals

Effect

SE

Total
Perceived personal cost

-2.845
-2.273

1.415
0.843

-2.011
-2.700

0.044
0.007

Perceived seriousness

-0.572

1.272

-0.450

0.653

b. Bias corrected and accelerated confidence intervals

Lower

Upper

Total
Perceived personal cost

-3.384
-3.583

-0.074
-0.434

Perceived seriousness

-1.240

0.837

Lower

Upper

Total
Perceived personal cost

-5.804
-4.224

-0.371
-0.877

Perceived seriousness

-3.309

1.847

C. The effect of reporting channel administration on whistleblowing

intention

C. The effect of reporting channel administration on whistleblowing

intention

a. Normal theory tests for indirect effects

a. Normal theory tests for indirect effects

Effect

SE

Effect

SE

Total

-0.201

0.516

-0.390

0.697

Total

-0.190

0.415

-0.459

0.646

Perceived personal cost

-0.201

0.516

-0.390

0.697

Perceived personal cost

-0.190

0.415

-0.459

0.646

b. Bias corrected and accelerated confidence intervals

b. Bias corrected and accelerated confidence intervals

Lower

Upper

Total

-1.645

0.709

Perceived personal cost

-1.645

0.709

intentions is particularly important from the perspective of

practice and academia.
Our results suggest that lower-level employees whistleblowing intention is higher when the reporting channel is
administered externally by a third-party instead of internally. This is consistent with expectations that a reporting
channel administered by a third-party may represent a
stronger procedural safeguard of anonymity and avoids the
appearance of impropriety than one administered internally
(ACFE 2005; The Network 2006).

123

Lower

Upper

Total

-1.455

0.558

Perceived personal cost

-1.455

0.558

Our study also finds a bystander effect that negatively

influences whistleblowing intentions in the qualification
fee case. In contrast, the presence of bystanders seems to
have a positive impact on whistleblowing intention in the
fictitious supplier case. We surmise that a likely explanation for this unexpected finding is an important difference
in our manipulation of the presence of bystanders across
the two cases. In the qualification fee case, because the
bystanders see the would-be whistleblower leave the copy

Whistleblowing Intentions of Lower-Level Employees

room, he knows that they are aware of his knowledge about

the fraudsters scheme. In contrast, in the fictitious supplier
case, the potential whistleblower is completely anonymous
and knows that the bystanders who overheard the fraudster
are not aware of his knowledge of the fraud. Given this
important difference in our manipulation of the bystander
present condition, the apparent inconsistent findings can be
explained by the concept of evaluation apprehension
(Schwartz and Gottlieb 1976). According to this notion,
would-be whistleblowers are concerned with others evaluations. In the qualification fee case, the potential whistleblower is not anonymous and would be concerned about the
other bystanders evaluation of him if he reports the fraud.
In the fictitious supplier case, however, the potential whistleblower is completely anonymous and does not have to be
concerned about others evaluation. Moreover, identifying
him as the whistleblower may be more difficult since there
are at least two other bystanders who observed the fraud.
The results also suggest that when the reporting channel
is administered internally, the reporting intention of a
potential whistleblower is significantly lower when there
are other bystanders compared to when there are no other
bystanders. In contrast, whistleblowing intentions do not
differ significantly between the two conditions when the
reporting channel is administered externally by a thirdparty. This provides further evidence of the difference in
effectiveness between internally and externally administered reporting channels in promoting whistleblowing.
In addition, we find that an individuals whistleblowing
intention is significantly lower when the wrongdoer is a
supervisor than when s/he is a coworker. This effect is,
however, not significantly reduced by the use of an externally administered reporting channel.
The overall results of our path analyses are consistent
with Schultz et al. (1993) model which depicts individuals
intention of reporting questionable acts as a function of
three assessments (i.e. perceived seriousness of questionable acts, perceived personal responsibility, and perceived
personal cost). More importantly, our results indicate that
presence of bystander and power status of wrongdoer
impact employees whistleblowing intention through perceived personal responsibility and assessments of personal
cost respectively.
Before discussing the implications of our findings, we
note some limitations. First, we do not specifically measure
the extent of diffusion of responsibility, evaluation apprehension, threat of retaliation, and anonymity. Thus, we are
not able to directly assess the actual process by which
whistleblowing intentions are formed. Second, our manipulation of the bystander effect across the two cases differs in
anonymity in observing the wrongdoing. As a result, the
influence of this aspect of anonymity and that of the
bystander effect appear to be confounded in the second case.

97

Third, our dependent measure is whistleblowing intentions,

which are not always predictive of behavior. Fourth, our
participants are business students. Whether the results can be
generalized to other groups of individuals is unknown.
Our research has implications for both practice and
future research. With respect to practice, our results together with those of Kaplan et al. (2009) present an interesting dilemma. While our findings suggest that an
externally administered reporting channel may promote
whistleblowing among lower-tier employees, upper-level
management may prefer an internally administered channel
to protect the reputation of the company. The issue is,
however, in practice; companies can balance the need to
detect fraud and the importance of protecting the companys reputation.
With respect to research, our study findings suggest
several areas for future investigation. One possible extension is the simultaneous examination of the external
reporting channels high confidentiality, its use of trained
professionals and its effective investigation process afterward, which are all posited to have a positive influence on
whistleblowing intentions (Kaplan et al. 2009). It may be
the case, for instance, that employees perception of the
quality of the professionals employed at the external
reporting agency, along with their assessment of the quality
of the post-report investigation procedures, are just as
important as their belief in the confidentiality of reporting.
A further interesting question relates to the reporting
channel medium. Trevino et al. (1999) examine outsourced
telephone hotlines. Future studies can examine whether the
reporting mediumtelephone, email, web-based, etc.
influences whistleblowing intentions.
The results of our mediation tests also suggest that not
all expected mediators are significant. Future research can
investigate alternative processes by which the antecedent
factors impact whistleblowing intentions.
Finally, the apparent inconsistent findings between our
two cases indicate that distinguishing anonymity in
observing the wrongdoing from anonymity in reporting the
wrongdoing is important. In particular, our results suggest
that anonymity in observing the wrongdoing can impact the
extent of evaluation apprehension which may be an
important factor in influencing whistleblowing. Future
research can be specifically designed to further examine
this possibility.

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