Legitimacy Theory Perspective Research Articles

Exploring online sustainability disclosure in the healthcare industry: Evidence from best international hospitals

AbstractSociety's growing attention to sustainability has also brought about major challenges for the healthcare sector. In particular, hospitals by virtue of their function are also called to incorporate social and environmental issues in the undertaking of their activities. In this scenario, hospitals must also provide a correct representation of these issues through an adequate sustainability disclosure. However, despite the relevance of the topic, it is still little explored in the academic field. This study aims to fill this important gap by investigating the determinants of online sustainability disclosure through a legitimacy theory perspective. The econometric analysis, conducted on a sample of the best hospitals in the world, highlights a low level of dissemination of sustainability information. Furthermore, it demonstrates a positive impact of the size, public status and teaching status of hospitals on the amount of sustainability information disclosed by these institutions through their website.

Implementing the European Union Green Taxonomy: implications for small- and medium-sized enterprises

ABSTRACT This research investigates accounting practitioners’ perceptions of the feasibility of implementing the EU Green Taxonomy (“the Taxonomy”) for Small- and Medium-Sized Enterprises (SMEs) and assesses the reporting challenges, supports required and SME benefits from the provision of Taxonomy disclosures. We approach our study from the perspectives of institutional theory and legitimacy theory. We adopt a novel methodology to explore our research questions using two case studies to engage 192 SME accounting practitioners in completing a survey questionnaire. We differentiate respondents in terms of “performers” and “conformers”. Our findings suggest that accounting practitioners believe the Taxonomy requirements to be feasible. From a legitimacy theory perspective, the data suggests both symbolic and substantive actions may be taken in providing Taxonomy disclosures. We also find evidence to suggest that where implementation costs are substantial, accounting practitioners believe that SMEs will only align with the Taxonomy when coerced to do so, consistent with institutional theory. Our findings add to the growing literature on the Taxonomy by showing that the quality of disclosures is contingent on targeted provision of government funding and resources to SMEs and their accounting practitioners. Highlights Surveyed SME accounting practitioners on the feasibility of the EU Green Taxonomy. Novel methodology using two case studies to engage SME accounting practitioners. SME Accounting practitioners believe the Taxonomy requirements to be feasible. Resource constraints may lead to meaningless disclosures and potential greenwashing.

Research in the greenwashing field: concepts, theories, and potential impacts on economic and social value

This paper aims to define a theoretical background for investigating greenwashing from a business economic perspective. We consider possible research questions in the relevant field of study, which is business economics studies. The first research step proposes a path that will orient scholars to the multifaceted perspectives of greenwashing. The second step analyzes the main theories that can support researchers and might motivate the possible greenwashing strategies. The third step highlights the potential link between greenwashing, reputational and relational capital, and a broad concept of value that includes the social dimension. Finally, we propose a conceptual framework that highlights some emerging research issues and anticipates the effects of greenwashing. Considering that self-regulation is not effective in reducing the gap between substantive and symbolic behaviors, the main practical implication of this study lies in addressing the need for stronger regulation and effective legal enforcement, not only to improve mandatory environmental disclosure but also to develop an audit process of such disclosure. Our analysis offers a number of suggestions for future research. Considering the centrality of disclosure in the theoretical framework we defined for greenwashing, future research could adopt the legitimacy theory perspective to focus on the role of mandatory environmental, social, and corporate governance (ESG) disclosure as well. Further, our conceptual framework highlights a possible research issue that investigates how a social value destruction resulting from inconsistent environmental strategies, may impact shareholders’ economic value.

State ownership and market reactions to misconduct announcements of Chinese listed firms: a legitimacy perspective

Announcements of corporate misconduct can trigger negative market reactions. However, our understanding of mechanisms that shape variations of investors’ responses across different disclosed-firms is underdeveloped. From the legitimacy theory perspective, this study focuses on the impact of state ownership on market reaction to misconduct announcements. Using a sample of misconduct announcements of Chinese listed firms from 2010 to 2021 and employing a combination of an event study method and a Heckman two-stage model, this study finds that market reaction to misconduct announcements is weaker if state ownership of the disclosed firm is larger. Furthermore, the affiliation level of SOEs (central SOEs versus local SOEs) weakens the positive association between state ownership and market reaction. The main positive effect is strengthened when the disclosed firms are located in regulated industries.

Does Environmental Cost Expenditure Matter? Evidence from Selected Countries in the Asia-Pacific Region

This study investigated the effect of companies’ environmental cost expenditure on environmental performance and the disclosure thereof by selected companies in the Asia-Pacific region. This region is vulnerable to significant environmental degradation due to its substantial economic development. This study examined the issue from a legitimacy theory perspective. Secondary data, collected from the Bloomberg database of 578 listed companies from 2008 to 2020, were used as the sample for the study. The results show that the level of environmental cost expenditure does matter because it was positively associated with environmental performance and its disclosure. The environmental performance variable also served as a mediating variable between environmental cost expenditure and disclosure. Disclosure provides a signal to investors to access companies’ environmental initiatives and risks, which could influence their investment decision. The findings highlight the importance of companies’ financial commitment to protect and preserve the environment in their daily operation. The findings also help managers to make strategic business decisions to strengthen their companies’ legitimacy by operating within the norms and values shared by society. The results from this study provide an insight which can be generalized with respect to companies from other regions.

The drivers of sustainability disclosure practices in the airport industry: A legitimacy theory perspective

AbstractIn recent years, the airport industry is facing the effects of the growing pressure towards sustainability. In fact, airports have often been accused of having strong environmental and social impacts. This circumstance shed light on the need for airports to provide stakeholders with precise information about the social and environmental effects of their activities. The importance of sustainability disclosure in the airport industry is also attracting the interest of academics. However, studies are still limited and there is a lack of contributions aimed at identifying the drivers of sustainability disclosure in the airport industry. This work aims to fill this gap by analyzing, under the lens of legitimacy theory, the impact of business size, business complexity and corporate visibility on the level of sustainability information disseminated by airports. To this end, a manual content analysis is performed on a sample composed by 145 large European airports to measure the level of sustainability information disseminated. Furthermore, a multiple regression analysis is performed to examine the role played by business size, business complexity and corporate visibility on the level of sustainability disclosure. The results show that the number of passengers, the cargo quantity, the number of terminals and gates and the level of social media exposure represent positive drivers of the sustainability disclosure of the European airports. This study contributes to enriching the academic literature in several ways and offers important managerial implications.

Directors' experience and the performance of IPOs in the rubber promotion boom: A legitimacy theory perspective.

Directors' experience and the performance of IPOs in the rubber promotion boom: A legitimacy theory perspective.

Sustainability and Financial Reporting Quality for Listed Manufacturing Companies in Nigeria: The Legitimacy Theory Perspective

The universal declaration of a healthy and sustainable environment was adopted by the United Nations (UN) Human Rights Council in 2021 as a fundamental human right; The U.S. Security Exchange Commission in March, 2022 and the European Union's directives in 2014 strengthen the need for all reporting entities to include sustainability reports in their annual reports, for the purpose of improving the quality of financial reporting. Our study examined how sustainability reporting affects the quality of financial reporting from the perspective of legitimacy theory, within the manufacturing sectors in Nigeria as a result of their environmental impact amongst other sectors. The published annual reports of 16 listed manufacturing companies, on the Nigerian Stock Exchange Market, were observed between the financial reporting periods of 2011 and 2020. Sustainability indices were proxied using both the Environmental Disclosure index and Social Disclosure index, while the financial reporting quality was measured using the Accrued earnings management, following the Jones (1991) Model. Using a panel regression analysis, the study applied the Variance inflation factor to test for multicollinearity among the predictors and also employed the fixed effect estimator, as suggested by our Hausman test result, in analyzing the observed data. Our findings revealed that environmental disclosures do not impair the quality of their financial reports. Such impracticability could have resulted from the use of strict environmental regulations by the government and its agencies. However, opportunistic managers could use social disclosure information to dilute the quality of financial reporting. We also found that the profitability performance of manufacturing firm is highly susceptible to impairing the quality of financial reports. We suggest that auditors should be provided with a full-fledge understanding of sustainability reporting to unveil managements' practice of earnings management; the financial reporting council should mandatorily impose the disclosure of sustainability information either as a stand-alone report or as part of the annual reports to allow stakeholders to make relevant economic decisions about the firm; and adequate internal control systems should be in place and should be assessed on yearly basis, as firms continue to operate.

Stakeholder or Legitimacy Theory? The Rationale behind a Company’s Materiality Analysis: Evidence from Indonesia

Recently, more and more research has examined sustainability reports, including how to process materiality analysis in sustainability reports. However, the motivation for why and how companies prepare materiality analysis has not received much attention from researchers. This study fills a gap in the sustainability literature related to materiality analysis by identifying the theoretical motivations of companies in conducting materiality analysis. The literature review on materiality analysis also showed that the existing measurements have not used the GRI 102-46 and 102-47, which are guidelines for companies in conducting materiality analysis based on the GRI. Therefore, this study developed a measurement of materiality analysis based on GRI 102-46 and 102-47. This study aimed to assess materiality analysis in sustainability reports based on the perspectives of legitimacy theory and stakeholder theory. The research sample was 150 sustainability reports of company listed on the Indonesia Stock Exchange from 2018 to 2020. The researcher developed an index using the GRI approach to measure the quality of materiality analysis. This study proves that the legitimacy theory perspective is mainly the basis for the company in conducting materiality analysis. This study also found no significant improvement in the quality of materiality topic analysis from 2018 to 2020. Of the four financial characteristics, only DER has a significant relationship with materiality analysis, which indicates that the disclosure of materiality analysis tends to be related to the company’s debt condition. The study fills a gap in the literature by contributing to research on sustainability reporting quality, specifically on materiality analysis.

A legitimacy theory perspective on Scope 3 freight transportation emissions

AbstractFreight transportation emissions reduction is on the environmental sustainability agenda for the logistics and transportation function in many organizations. Transportation is the fastest growing form of emissions in developing countries and is second only to electricity emissions generation globally. However, freight transportation is not a priority on the overall organizational sustainability agenda for many companies. This research uses in‐depth interviews with 12 organizations to provide insight into the Transportation functional and the organizational level action and commitment to freight transportation emissions reduction as part of the overall corporate sustainability agenda. The context of this research takes the perspective of shippers to understand the benefits perceived by shippers in joining a green network/partnership focused on the reduction of freight emissions, fuel consumption, and the associated costs. In most organizations, reducing freight emissions is managed within the Transportation function and there is a lack of organizational focus on outsourced freight transportation emissions reduction. Given the increasing saliency of emissions reductions in many organizations, this represents a gap that needs to be addressed. The research suggests methods for creating more concern and visibility of freight transportation emissions.

Value creation attempts via photographs in sustainability reporting: a legitimacy theory perspective

PurposeThis paper aims to investigate the use of legitimacy strategies via the usage of photographic disclosures in sustainability reporting as an attempt towards creating value.Design/methodology/approachThis study used visual content analysis to identify disclosure trends and value creation themes from sustainability-related photographs in the annual and sustainability reports of Fonterra Co-operative Group over a ten-year period. The findings were interpreted using legitimacy theory.FindingsThe findings show a significant increase in the usage of photographs to legitimise and reinforce the organisation’s sustainability messages. The photographs are dominated by images signalling to stakeholders’ positive sustainability messages, as a systematic method for managing stakeholder expectations to maintain, gain and even repair legitimacy. A majority of photographs have supporting textual narrative, which could be construed as an attempt by the company to make their sustainability messages explicit and provide greater legitimacy of activities and performance with the ultimate aim of enhancing organisational value.Research limitations/implicationsThis study contributes towards an in-depth understanding of attempts at seeking legitimacy and creating organisational value through the systematic usage of photographic disclosures in sustainability reporting.Practical implicationsThis study has the potential to inform stakeholders on linkages between sustainability photographs, value creation and legitimacy. It can help inform and assist report preparers, designers and users on the potential of photographs as a substantive medium to manage legitimacy in sustainability reporting.Originality/valueThis paper adds to the scant literature on the growing use of photographs as a value adding apparatus in sustainability reporting. This paper also extends the applicability of legitimacy theory to visual disclosure and suggests that legitimacy can be systematically sought to create value.

Legitimacy Theory Perspective on the Quality of Carbon Emission Disclosure: Case Study on Manufacturing Companies in Indonesia Stock Exchange

Issues related to the green industry and environmental accounting are urgent to be formulated by the government. The concept of environmental accounting for companies encourages the ability to minimize environmental problems. Environmental accounting will produce a quantitative assessment of the costs and impacts of environmental protection. The purpose of this study is to describe the extent of disclosure of carbon emissions and to describe the legal regulations in Indonesia which regulate ecological disclosure. This study also examined the effect of the Environmental Performance Awards on the quality of environmental exposure. The samples are 35 companies engaged in mining, energy, chemistry, pharmaceuticals, cosmetics, food, and beverages that are listed on the Stock Exchange in 2012-2016. The data analysis method used is Ordinary Least Square (OLS). The result reveals that the practice of environmental disclosure at high profile companies on the Indonesia Stock Exchange is still low. This shows that the company’s management awareness of environmental exposure does not comply with the Decree of the Chairperson of the Capital Market and Financial Institution Supervisory Agency Number: KEP-431/BL/2012 concerning Submission of the Annual Report. The results showed that the Environmental Performance Awards variable had a significant positive effect on the quality of environmental disclosure.

Relação entre Sustentabilidade e Inovação: uma análise da legitimidade organizacional das empresas do setor elétrico brasileiro

Esta pesquisa visou identificar junto às empresas do setor elétrico listadas no Índice de Sustentabilidade Empresarial (ISE) se a inovação em Responsabilidade Social Corporativa (RSC) é utilizada como item estratégico para legitimar suas ações, tendo como base a perspectiva da Teoria da Legitimidade. A RSC coloca a companhia atuando de forma ética e buscando a eficácia econômica, sem excluir as necessidades sociais e dos trabalhadores. O artigo focou na compreensão de três dimensões da inovação: incremental innovation, radical innovation e game-changing innovation, relacionadas a mudanças em processos, ações e relações empresariais. Esta pesquisa delineou-se como descritiva e documental, baseada em dados secundários analisados de 2011 a 2016, totalizando 9 empresas escolhidas e 54 relatórios. No quesito incremental innovation, apesar de divulgadas, não é claro se tais ações são apresentadas como reais práticas de RSC ou se buscam somente legitimar as organizações frente a seus stakeholders. Já no quesito radical innovation observaram-se, por exemplo, mudanças no comportamento dos fornecedores quanto à integração da inovação nas companhias analisadas. No item game-changing innovation, apesar de algumas iniciativas, a maioria dos relatórios não apresentou ações consistentes. Conclui-se que ainda há poucas informações das mudanças provocadas pelas inovações tanto tecnológicas quanto operacionais, oriundas de novas práticas, procedimentos e costumes. Adicionalmente, a inovação como estratégia pode ser entendida como uma forma de legitimar as ações da RSC, estando mais voltadas para obrigações impostas pelos órgãos reguladores. Logo, há uma lacuna quanto ao seu objeto enquanto característica social.

How Technology is Changing Accounting Processes: Institutional Theory and Legitimacy Theory Perspective

Given the ubiquitous use of accounting systems in organizations and the rapid advancement of information technology, this conceptual paper discusses how the adoption of information technology which improves accounting functions impacts organizations. Based on the literature, we argue that accounting systems are institutionalized within organizations and provide external legitimacy. Following literature review of the key constructs, we develop four propositions related to how the adoption of new information technologies in accounting impacts institutional processes and legitimacy, and organizational performance. We close with discussion of the theoretical and practical implications, and limitations and future research directions.

Corporate social reporting and legitimacy in banking: a longitudinal study in the developing country

PurposeThe purpose of this paper is to examine the development of corporate social (CS) reporting in the developing country’s banking industry from the legitimacy theory perspective – Bangladesh as a case.Design/methodology/approachThis study uses the longitudinal aspects and analyzes the content of annual reports using the ISO26000 standard with some country- and industry-specific adjustments as the method of data coding. All Dhaka Stock Exchange-listed banks (30 of 47, 2013) and 282 annual reports with 46 reporting items have been used for data analysis during a 10-year period (2004-2013). A CS reporting index has been constructed for this purpose of analysis.FindingsThe key findings are that the main impetus driving the development of CS reporting was the stakeholder initiatives; the CS reporting index was less than 20 in 2004, and it increased linearly and reached around 60 in 2013 because of the legitimization of the new banking process through social perceptions. This study explains that the contemplation of the legitimacy theory argument can similarly be applied to the developing countries as well as to the banking industry’s context.Research limitations/implicationsThe main implication of this study is the extension of the broader thrust of the legitimacy theory argument in the developing country’s banking industry, such as that of Bangladesh.Originality/valueThis study contributes to the documentation of the CS reporting practices of the developing country’s banking industry where there is a lack of published longitudinal studies from the legitimacy theory perspective.

Study of country-of-origin image from legitimacy theory perspective: Evidence from the USA and India

This study explored country-of-origin image (CoI) based on legitimacy theory. The comments and discussions about Chinese products' CoI from both Indian and American customers on public websites were collected and analyzed. The findings show that CoI is essentially a kind of recognition and judgment of a product's legitimacy. Customers judge a Chinese product's pragmatic legitimacy and social legitimacy through both a performance image and institution image aspect of the CoI, respectively. The findings can advance our understanding of CoI phenomena and provide guidance for international marketers in developing countries to manage country-related information more effectively.

The practice turn in environmental reporting

PurposeThe purpose of this paper is to explore environmental reporting in the Australian Commonwealth public sector through the focus on departments with a primary responsibility for social and environmental issues.Design/methodology/approachThe research moves beyond the existing theorisation for environmental reporting through a legitimacy theory perspective and adopts Bourdieu's theory of practice. The practices of the two selected departments for this study are assessed through interviews and documentary data.FindingsThe findings suggest that the practice of environmental reporting in a research context moves beyond legitimacy considerations with the internal context being critical in explaining current practices. It is in this regard that the theoretical perspective provides useful insights in understanding environmental reporting in the Australian commonwealth public sector.Research limitations/implicationsThe paper calls for further studies that go beyond desk‐based analysis of environmental disclosure and utilise field studies and varying theoretical perspectives which focus on the practices that lead to the production of environmental reporting via various media.Practical implicationsThis paper provides insights into how internal actors influence the practice of public sector environmental reporting which has practical implications for the development and enhancement of environmental reporting in many jurisdictions.Originality/valueThe paper develops a theoretical perspective for environmental accounting that provides a comprehensive account of environmental reporting in a specific context. This approach could be utilised in different contexts and contributes towards extending the existing theorisation for environmental reporting.

Comparing Australian 'Community Banks' - Theories Explain Their Success

This paper explores the similarities and differences among three community-based banking models implemented in Australia, in terms of size, structure, core function and partnership with the community. Despite the differences each model appears to be successful, even where community-based banks are being established in communities already well serviced by other banks. This paper suggests that part of the answer to the success of these community-based banks lies within the theories of economic sociology and accounting, particularly the theory of embeddedness and legitimacy theory. Within the context of embeddedness, this research proposes that rather than a specific type of embeddedness it is the general communitarian ties of these banks that contribute to their success, while from legitimacy theory perspective customers see community-based banks as fulfilling their social contract via community engagement activities.

Environment disclosure in Malaysia annual reports: A legitimacy theory perspective

This study attempts to apply legitimacy theory to determine if it explains the extent and nature of environmental disclosures made, and the reasons for the disclosure in the context of Malaysian industrial products and construction companies. The study adopts a dual methodology of content analyses of annual reports and a questionnaire survey. Findings show some limited support for legitimacy theory in explaining the nature of disclosure, as well as the reasons for the disclosure. Extent of environmental disclosures is, however, very low. Further research is suggested in other industry sectors to examine if the results are consistent across industry sectors.

Auditing of environmental management systems: alegitimacy theory perspective

Provides findings from a survey of environmental management systems (EMS) auditors at ISO 14001‐certified sites of Australian enterprises. Taking a legitimacy theory perspective, this study investigates the way in which enterprises with certified sites are meeting their implied social contract with stakeholders (also termed “relevant publics”) on environmental conduct. Investigates whether EMSs, and related environmental audit functions, are being treated as quality assurance tools for the betterment of environmental performance, or as impositions to be complied with so as to maintain the credential of ISO 14001 certification per se. Seeks to throw light on this legitimacy theory issue by providing evidence about management’s motivation behind, and strength of support for, the EMS auditing function at ISO 14001‐certified sites. Obtains evidence about the objectives for the EMS auditing function, the resources committed to it and the perceived benefits arising from meeting the requirements for certification. Results point consistently to the conclusion that management have emphasised having enough compliance to maintain their site’s ISO 14001 certification credential.