Legitimacy meaning in the cambridge english dictionary. The cambridge handbook of stakeholder theory edited by jeffrey s. This paper will also provide insights into the origins of legitimacy theory as used in the social and environmental accounting literature as well as providing reflections about the strengths, and shortcomings, of the theory. From legitimacy to accounting and auditing for citizenship. Conceptualizing legitimacy as a thing an asset or characteristic to be gained, increased and lost clearly emphasizes some attributes of a phenomenon at the. Legitimacy theory overlapped stakeholders theory, intuitional theory and positive accounting theory which are discussed above. Social values can be linked with economic actions with the help of accounting. An aspect of legitimacy theory, investigated in this research, is that in order to continue to exist a corporation will act to remain legitimate in the eyes of whom it considers is able to. Legitimacy is a generalized perception or assumption that the actions of an entity are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs, and definitions suchman, 1995, p. Normative legitimacy and the state oxford handbooks. Perhaps more than ever before, corporate governance reforms bear a much closer resemblance to institutional mechanisms typically found in government. Such forms of accounting and accountability are conceptualized as means for activating some form of emancipatory change, in the relationships between business, society and the environment.
As social contract plays an important role in legitimacy theory. Dec 02, 2019 this paper will also provide insights into the origins of legitimacy theory as used in the social and environmental accounting literature as well as providing reflections about the strengths, and shortcomings, of the theory. Wilmshurst victoria university of technology, melbourne, australia geoffrey r. A stakeholder is any person or entity that has a significant interest in the success or failure of a business. In addition, the accounting theory provides the rules. The principal objective of this paper is to expand the scope of legitimacy theory lt through a detailed analysis of the links that exist between the legitimising strategies of firms and the characteristics of the political environment in which they are developed. Legitimacy definition of legitimacy by merriamwebster. Legitimacy theory is based on the idea that a social contract exists between business. Legitimacy theory posits that businesses are bound by the social contract in which the firms agree to perform various socially desired actions in return for approval of its objectives and other rewards, and this ultimately guarantees its continued existence. In this study, we use institutional theory to explore how institutional pressures exerted on four state governments new york, michigan, ohio, delaware influenced the decision of these governments to adopt or resist the use of generally accepted accounting.
Concepts, evidence and implications by thomas donaldson and preston lee. Stakeholder theory takes a broad view of the constituencies that a corporation serves. Legitimacy definition is the quality or state of being legitimate. The ultimate theories in corporate governance started with the agency theory, extended into stewardship theory and stakeholder theory and evolved to resource dependency theory, political theory, legitimacy theory and social contract theory. Legitimacy theory is theory that, in the last decade, has become increasingly used by accounting researchers, particularly researchers working in the area of social and environmental accounting.
A story of reporting social and environmental matters within the australian food and beverage industry professor james guthrie discipline of accounting, the university of sydney associate professor suresh cuganesan macquarie graduate school of management and leanne ward cocacola amatil. Financial accounting theory, third edition, provides students with an appreciation of the origin and significance of financial accounting theory, explores application of this theory in the current accounting environment and provides a forum for discussion on the possible future directions financial accounting theory, research and practice might. Spiramus press methodological issues in accounting. In our conception, legitimacy theory has the role of explaining the behavior of organizations in implementing and developing voluntary social and. Stakeholders can have a significant impact on decisions regarding the operations and finances of an organization. Corporate social disclosures csd are primarily voluntary in nature and as such provide fertile territory for research into the motivational aspects for these disclosures. Islam, muhammad azizul, csr reporting and legitimacy theory. Suggestions are made with respect to the ongoing application, and development, of legitimacy theory. It is a theory originating during the age of enlightenment, that typically addresses the questions of the origin of society and the legitimacy of the authority of the state over the individual. Evidence from china changes in value of the chinese market are much lower than changes in the markets values of other countries legitimacy theory is the theoretical basis in this article.
In terms of the future direction of the applicability of the legitimacy theory, there appears to be a number of subject areas or legitimacy. Analysis of institutional theory and stakeholder theory to. If this is your first time registering, please check your inbox for more information about the benefits of your forbes account and what you can do next. Intraindustry environmental disclosures in response to the. This is not an example of the work produced by our essay writing service. Stakeholder theory, accounting, and business legitimacy.
Legitimacy theory is based on the idea that a social contract exists between business and society. While the term exists beyond the political realm, as it encompasses sociology, philosophy, and psychology, legitimacy is often referred to with respect to actors, institutions, and the political orders they constitute. With government, legitimacy is usually conceptualized in two main ways. Legitimacy theory is derived from the concept of organisational legitimacy, which has been defined by dowling and pfeffer 1975, p. The conventional accounting framework, with its emphasis on decisionusefulness, has largely proved unsatisfactory in explaining this practice, as have various economic theories. Legitimacy legitimacy theory looks at how organisations behave to maintain their social contract. Refinements to legitimacy theory in social and environmental accounting. Indeed, it is probable that legitimacy theory is the most widely used theory to explain. Stakeholders can have a significant impact on decisions regarding the operations. Some thoughts on future research agenda april 6, 2017. The aim of this study is to explore the possibility of using the legitimacy theory as a plausible explanation for csr reporting practices by organizations within the context of developing nations. Legitimacy theory is a political theory and has implications on several business activities including accounting.
In order words, this debate has called for the need to reconsider the ethical foundations of accounting and accountability systems and practices. The legitimacy theory has a very rich disciplinary background based on management theory, institutional theory, and stakeholder theory burlea and popa, 20, p. The importance of accounting theory is seen to systematically create new knowledge by which the general framework of accounting practice could be guided. Legitimacy theory legitimacy theory has its foundations in the theoretical paradigm of political economy. The articles thesis is that sustainable management accounting is a. Corporate environmental reporting a test of legitimacy theory. Feb 27, 2012 various rationales have been advanced to explain the phenomenon of corporate social reporting. The political economy paradigm suggests that the economic sphere may not be deliberated in separation from the political, social and institutional framework in which the economy is positioned gray et al. As given in the assignment, it is stated that organizations sometimes voluntarily provide information in their annual reports which is not mandatory. The legitimacy theory and csr disclosure accounting essay. There is a lack of research into framework of legitimacy theory. Apr 10, 2017 islam, muhammad azizul, csr reporting and legitimacy theory. The main aim of this thesis was to refine and develop legitimacy theory as an explanation for voluntary corporate envirormiental disclosures in the armual report. The main assumption of legitimacy theory is fulfilling.
A story of reporting social and environmental matters within the australian food and beverage industry professor james guthrie discipline of accounting, the university of sydney associate professor suresh cuganesan macquarie graduate school of management and leanne ward cocacola amatil corresponding authorprofessor james guthriediscipline of accountingthe university of. According to legitimacy theory, companies disclose social responsibility information to present a socially responsible image so that they can legitimize their behaviours to their stakeholder groups. The role of theory in explaining motivation for corporate. Oct 23, 2009 the principal objective of this paper is to expand the scope of legitimacy theory lt through a detailed analysis of the links that exist between the legitimising strategies of firms and the characteristics of the political environment in which they are developed. With respect to political theory, a state is perceived as being legitimate when its citizens treat it as properly holding and exercising political power. This article offers a critical overview of the major normative theories of political legitimacy from the seventeenth century to the present day, with a special focus on the leading representatives of the social contract tradition. In terms of the future direction of the applicability of the legitimacy theory, there appears to be a number of subject areas or legitimacy threatening incidents to be researched within the context of. Strategically speaking, the sustainability of legitimacy theory is based on the. February 1999 accepted june 1999 corporate environmental reporting a test of legitimacy theory trevor d. Asked in politics and government, monarchy, civil rights movement. A story of reporting social and environmental matters within the australian food and beverage industry professor james guthrie discipline of accounting, the university of sydney associate professor suresh cuganesan macquarie graduate school of management and leanne ward cocacola amatil corresponding authorprofessor james guthriediscipline of. Pdf financial accounting theory download full pdf book. Social disclosure, legitimacy theory and the role of the.
Legitimising corporate sustainability reporting throughout. How to survive alone in the wilderness for 1 week eastern woodlands duration. Pdf refinements to legitimacy theory in social and. This research deals with the relationship between accounting and auditing for citizenship. Indeed, it is probable that legitimacy theory is the most widely used theory to explain environmental and social disclosures campbell, craven and shrives, 2003, p. Application of social contract in legitimacy theory brings transparency in the system and helps the society as a whole in many ways as discussed above.
Various rationales have been advanced to explain the phenomenon of corporate social reporting. Deegan 2002 and islam and deegan 2008 argue that corporate disclosure is best explained as a tool for maintaining legitimacy. This chapter explores the notion of organisational legitimacy and emphasises that organisational legitimacy can be considered as a resource upon. Consistent with the notion of legitimacy theory, companies seek to gain, maintain or repair their legitimacy by using social and environmental reporting. Discover the secret language the universes uses to send us guided messages and watch as. Normally the legitimacy theory is used to explain social and environmental reports disclosure. Intraindustry environmental disclosures in response to. In our conception, legitimacy theory has the role of explaining the behavior of organizations in implementing and developing voluntary social and environmental disclosure of information in order to fulfill their social contract that enables the recognition of their objectives and the survival in a jumpy and turbulent environment. In his new book political standards, karthik ramanna discusses thin markets and how they let bad regulation grow. Legitimacy theory and csr disclosure while there is no generally accepted theory for explaining csr disclosure practices, recent research in the csr literature has primarily reli ed on legitimacy theory deegan 2002, p. The paper is mainly concerned with a bringing some coherence to the framework of legitimacy theory and corporate environmental practices. This paper uses a legitimacy theory framework to explain why companies engage in this type of voluntary reporting.
Legitimacy theory is one of the most discussed theories to explain the phenomenon of voluntary social and environmental disclosures in corporate communication. Legitimacy theory helps to understand the organizations behavior in implementing, developing and. The legitimacy theory has a very rich disciplinary background based on management theory, institutional. The theory that a monarchs legitimacy to reign was approved by god was called the divine right of kings. Stock markets reaction to disclosure of environmental violations. Accounting for legitimacy harvard business school working. But the legitimacy theory can be used in corporate report, suggested by woodward et al. Pdf legitimacy theory in management accounting research. Indeed, the citizen as user of the financial information argues that the accountant and the auditor should take more responsibility for detection and dissemination of illegal acts to increase their legitimacy of the annual report. This chapter explores the notion of organisational legitimacy and emphasises that organisational legitimacy can be considered as a resource upon which many organisations are dependent for their survival. The paper draws arguments from literature to identify the role of the legitimacy theory in management accounting research.
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