consistent with research that has found that larger firms with more business

Consistent with research that has found that larger

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consistent with research that has found that larger firms with more business segments are more likely to provide a hotline channel ( Lee and Fargher 2013 ). In contrast, firms that experience higher growth are less likely to implement a stronger internal whistle-blowing system. This is consistent with research that has found that rapidly growing firms have poorer internal controls ( Ashbaugh-Skaife, Collins, and Kinney 2007 ; Doyle et al. 2007 ). Audit Committee Quality, Whistle-Blowing System, Retaliation, and Reporting Channel We conduct a path analysis to provide further evidence that audit committee quality affects the whistle-blowing reporting channel (internal versus external whistle-blowing) by ensuring the implementation of a stronger internal whistle-blowing system and reducing the likelihood of retaliation. The control variables included in the path analysis model are consistent with the ones specified in Models (1)–(3). The path analysis results are reported in Panel A of Table 7. 16 We cannot directly observe the strength of the whistle-blowing system; therefore, we rely on corporate disclosures on whistle-blowing policies because an effective whistle-blowing system would be expected to provide employees with a high level of disclosure regarding the whistle-blowing system ( Baloria et al. 2016 ; Lee and Fargher 2013 ). 17 We include these variables because a hotline channel helps to facilitate whistle-blowing ( Miceli et al. 2009 ), the ability to report anonymously reduces the perceived costs of reporting ( Ayers and Kaplan 2005 ; Kaplan, Pany, Samuels, and Zhang 2009 ), a designated whistle-blowing officer enhances the perception that there is a responsible person in charge of whistle-blowing matters ( Lewis and Spencer 2001 ), and providing whistle-blowing protection is important because the threat of retaliation is a key deterrent to whistle-blowing ( Arnold and Ponemon 1991 ; Cassematis and Wortley 2013 ). The Role of the Audit Committee in Their Oversight of Whistle-Blowing 179 Auditing: A Journal of Practice & Theory Volume 37, Number 1, 2018
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Consistent with our main results, we find that a higher-quality audit committee is associated with less external compared with internal reporting (p , 0.01). Further, we find that a higher-quality audit committee is associated with a stronger internal whistle-blowing system (p , 0.10), and a strong internal whistle-blowing system in turn reduces external compared with internal reporting (p , 0.10). This finding provides evidence that a higher-quality audit committee affects the whistle-blowing reporting channel by ensuring implementation of a strong internal whistle-blowing system. Consistent with our main results, we find that a higher-quality audit committee is associated with less whistle-blowing retaliation (p , 0.01). We also find that the incidence of whistle-blowing retaliation ( RETALIATED ) is positively associated with external whistle-blowing (p , 0.01).
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