Does Whistleblower Policy in Firms Affect Financial Reporting Quality, Risk Disclosures and Investment Efficiency? Evidence from an Emerging Economy

Submission note: A thesis submitted in total fulfilment of the requirements for the degree of Doctor of Philosophy to the Department of Accounting and Data Analytics, La Trobe Business School, College of Arts, Social Sciences and Commerce, La Trobe University, Victoria, Australia.

The overall purpose of this thesis is to examine the possible effects of the presence of a firm whistleblower policy on financial reporting quality, risk disclosure and investment efficiency. The sample of this study consists of 276 non-financial firms listed on the Bombay Stock Exchange S andP 500 Index over 2008–2013. The necessity for a firm whistleblower policy has been brought to light by regulatory bodies such as the Ministry of Corporate Affairs (MCA) of India, as a corporate governance reform, especially post the Satyam scandal. Therefore, the first empirical study of this thesis examines whether the presence of a firm whistleblower policy enhances financial reporting quality following the Satyam scandal. The findings reveal that firms with a whistleblower policy have lower discretionary accruals, signifying that financial reporting quality has improved in the post-Satyam period. The second empirical study investigates whether the presence of a whistleblower policy enhances corporate risk disclosure. The results show that firms with a whistleblower policy demonstrate improved risk disclosure compared with firms without a whistleblower policy. Finally, the third empirical study examines the impact of the presence of a firm whistleblower policy on investment efficiency. It also investigates whether firm risk disclosures improve the relationship between the presence of a whistleblower policy and investment efficiency. The results report that firm whistleblower policy is related to investment efficiency when firms are prone to underinvestment. Moreover, risk disclosures improve the relationship between the presence of firm whistleblower policy and investment efficiency in firms that are likely to be overinvested. This study contributes to the existing literature by providing empirical evidence on effects of firm whistleblower policy on financial reporting following a corporate scandal, risk disclosure and investment efficiency in an emerging economy where firms are characterised as having high promoter shareholdings. As a policy implication, findings suggest that Indian firms and regulators could utilise an effective whistleblower policy as a corporate governance mechanism for better financial reporting quality, improved risk disclosure and investment efficiency.