Over the last decade, scandals within the UK Financial Service sector have impacted their legitimacy and raised questions whether a compliance culture exists or not. Several institutional changes at the regulatory and normative levels have targeted stakeholders' concerns regarding compliance culture and led to changes in the legitimation process. This paper attempts to address a gap in the literature by asking the following question: How is the UK financial institutions' compliance culture shaped by the institutional environment and changing legitimacy claims? Towards achieving this objective, the paper draws on the institutional theory and pays attention to the various configurations of the legitimacy notion (property vs process Suddaby et al. Acad Manag Ann 11(1):451-478; 2017). The paper utilises a longitudinal interpretive design and undertakes a qualitative content analysis of fines issued by the UK regulator and the communicated response of violating firms as well as non-sanctioned firms. Our findings indicate that there is a cyclical 'evolutionary compliance' rather than the more widely recognised state of 'compliance culture'. This culture is fuelled by interchangeable isomorphic forces where the majority of violating firms are seen to issue similar responses to the regulators sanction to maintain their reputation and legitimacy in the market. Notably, legitimacy is now defined within an interactive process between the regulator and firms rather than being static and achieved by ticking the box.
We confirm that this manuscript has not been published previously, or being simultaneously considered for publication elsewhere. Simulationis it all worth it? The impact of simulation from the perspective of accounting students.
Structured Abstract:Purpose: This paper discusses the evolution of regulation and compliance in the last 20 years, to the current state of affairs. Despite earlier calls for ethical compliance within financial institutions, there remains scope for improvement within practice (as evidenced by on-going regulatory issues in the banking sector).Design/methodology/approach: Pre-crisis academic models of regulation and compliance are reviewed for evidence of use in practice. Some preliminary inductive research evidence is presented, 1 | P a g e following data collection via interviews with individuals impacted by compliance in financial service organisations. The interview data, facilitated by repertory grid, provides a post crisis assessment of the issues faced by practitioners to comply with new regulation.Findings: An over reliance on group think and consulting services in compliance approach is potentially holding back progress in compliance service. Due to the limited 'recent' empirical data offered in the literature, we believe further research into this area should be undertaken.Originality/Value: This piece of research will provoke reflection on current practice vs. existing academic theories, and seeks to identify whether alternative models are viable for the future of compliance approaches within practice.
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