Fraud and games? The impact of communication on occupational fraud, evidence from field experiments

Abstract

This research investigates the role of organizational communication in mitigating occupational fraud, with a particular emphasis on asset misappropriation. It systematically compares the perceived effectiveness of whistleblowing mechanisms against internal audits. Utilizing an experimental methodology grounded in game theory and the theoretical framework of Common Pool Resources (CPRs), the study implements a controlled sales-skimming game to empirically observe behavioral responses to varying governance structures. Results indicate that communication significantly attenuates fraudulent behavior irrespective of the strength of internal controls. Moreover, whistleblowing mechanisms are perceived by participants as more effective deterrents than traditional internal audit functions, resulting in lower instances of fraud. Critically, this study introduces a novel conceptualization by challenging the dominant agency theory paradigm, which traditionally frames occupational fraud through the lens of principal-agent conflicts. Instead, it advances the perspective of the organization as a CPR—subject to collective action problems and vulnerable to opportunistic depletion. By applying CPR theory to the organizational context, the research highlights that fraud prevention should be reconceptualized not solely as a matter of monitoring and aligning incentives, but as the governance of shared organizational resources susceptible to ’tragedy of the commons’ dynamics. This theoretical shift provides a new foundation for developing anti-fraud strategies that integrate collective stewardship principles alongside traditional control mechanisms.