The University of Iowa published a new study that demonstrates for the first time that financial shenanigans at companies decrease markedly in the years after whistleblowers come forward with information about wrongdoing inside their operations.

But the costs to whistleblowers are high. They often face retaliation from their employers and are blackballed in their industry. These very real perils underscore the significance of the new research by Jaron Wilde, an assistant professor of accounting at the University of Iowa’s Tippie College of Business.

Notwithstanding the risks, the incidence of such tips appears to be rocketing. The SEC, for example, heard from 4,218 tipsters in fiscal 2016, up 40% from the number who came forward in 2012. And since the SEC program’s inception in 2011, $136 million has been awarded to 37 whistleblowers.

IMPACT ON CORPORATE PRACTICES.    The study concluded that “following the allegations, whistleblower firms are significantly more likely to experience a decrease in the incidence of accounting irregularities and a decrease in tax aggressiveness, compared with control firms.” Moreover, the decrease lasted for at least 2 years. The study, however, did not determine whether the behavior change wears off after the 2 years.

Mr. Wilde’s research found that many of the tips were valuable, and that they typically involved companies with a significantly higher likelihood of financial misreporting in the period before the individuals came forward. While he acknowledged that some of the cases he studied were inconsequential, he added that there were “certainly a number of instances where whistleblowers are providing critical incremental information that allows the government to have a case against a company or an employee.”

The study also underscores the notion that insiders are best positioned to monitor companies’ financial reporting. This has become especially true as corporations have grown larger and more complex, Mr. Wilde said.