Legitimacy Theory

Burlea, Adriana Şchiopoiu; Popa, Ion

doi:10.1007/978-3-642-28036-8_471

Cited by 74 publications

(34 citation statements)

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“…Stakeholders’ theory considers the welfare of society the bank is operating and emphasises on the development of community well-being, which includes a board range of stakeholders base, such as employees, customers and communities (Freeman and Dmytriyev, 2017). Besides, legitimacy theory explains the behaviour of banks to fulfil the social and environmental responsibilities to society to achieve organizations’ objectives by gaining stakeholders’ trust and safeguards themselves during unstable situation (Schiopoiu Burlea and Popa, 2013). Previous studies argued that CSR and corporate tax payments are related only in terms of their contribution to the broader community (Avi-Yonah, 2008; Williams, 2007).…”

Section: Introductionmentioning

confidence: 99%

The impact of corporate social responsibility on stock price volatility of the US banks: a moderating role of tax

Tasnia

Alhabshi

Rosman

2020

JFRA

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Purpose Corporate social responsibility (CSR) is considered one of the crucial branding and promotional tools for banks to legitimise their role in society to become socially and environmentally responsible corporate citizen. The purpose of this study is to investigate the effect of CSR on stock price volatility of the US banks. This study further examined the moderating role of tax on the relationship between CSR and stock price volatility. Design/methodology/approach This study uses the random-effects panel regression estimation technique to test the hypotheses. The authors include a sample of 37 US banks from 2013 to 2017 with 144 bank-years observation. The authors consider the environmental, social and governance (ESG) scores from Refinitiv as a proxy for CSR. The financial data are also collected from the Refinitiv Datastream database. Findings This study finds a significant and positive relationship between CSR and stock price volatility, which indicates that shareholders of the US banks may not prefer excess concentration on CSR because of the additional cost of investment associated with implementing CSR. Also, tax payments and stock price volatility show a significant positive association, which implies that there is a higher possibility of an increase in stock price volatility if the tax rate increases. Generally, shareholders are not interested in paying more taxes, so they may swap the market instead of paying more tax. On the other hand, the authors find a non-significant moderating effect of tax payment on CSR-volatility nexus. Originality/value Previous studies mainly focussed on CSR and financial performance of banks. Conversely, studies focussing on CSR and stock volatility are limited. This study will fill the gap in the literature by considering the effect of CSR on the stock price volatility of the US banks.

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Section: Introductionmentioning

confidence: 99%

The impact of corporate social responsibility on stock price volatility of the US banks: a moderating role of tax

Tasnia

Alhabshi

Rosman

2020

JFRA

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“…Legitimacy is a relative concept as with the change in society's expectation organization has to reshape its activities for legitimization. Based on this theory, impression of the organization is responsive to society's expectation where organization has to validate its existence through legitimate economic, environmental and social arrangements that do not endanger the social system within which it operates (Schiopoiu Burlea and Popa, 2013). Eventually, power of the organization represents its legitimacy that is not a legal validity but a tacit respect of legal and voluntary moral social norms (Gunningham et al, 2004).…”

Section: Theoretical Background and Conceptual Framework 21 Legitimacy Theorymentioning

confidence: 99%

Impact of COVID-19 pandemic on financial reporting and disclosure practices: empirical evidence from Bangladesh

Sultana

Ghosh

Sen

2021

AJEB

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PurposeTo investigate the consequence of COVID-19 pandemic on the financial reporting and disclosure (FRD) practices, the study has been conducted. Moreover, this paper highlights the significance of FRD practices in any emergency period and its relevance with legitimacy theory in Bangladesh Perspective.Design/methodology/approachThe COVID-19 pandemic has adverse impact on business. Hence, all the business activities have been categorized into five major aspects which are financial factors, business operations, business contracts, business value and stakeholders. These five major activities have been considered as independent variable. By analyzing various policy recommendations and guidelines of global and local accounting bodies, a structured questionnaire was developed in association with related IAS and IFRSs. Then, it was distributed among the accounting professionals of Bangladesh who are currently engaged in financial statement preparation and auditing services. Finally, data was analyzed through structural equation modeling (SEM) to test the hypothetical relationship between dependent variable and independent variable.FindingsThis study finds that financial factors, business contracts and stakeholders have significant relationship with the financial reporting and disclosure practices during the COVID-19 pandemic period. However, business operation and business value have no significant relationship with financial reporting and disclosure practices.Research limitations/implicationsThis study tries to analyze why and how firms should disclose essential information (both financial and non-financial) to the financial statement users during the COVID-19 pandemic. This study can be used as benchmark to issue a separate policy or standard for reporting any kind of adverse event in the financial reporting and disclosure practices.Originality/valueTo our best knowledge, we believe that this is first kind of study undertaken to investigate the consequence of COVID-19 pandemic on the FRD practices in the context of Bangladesh. This study is kind of exploratory in nature. Hence, future studies can explore industry-based financial reporting and disclosure practice in any pandemic period.

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“…The economic, social, and environmental challenges faced by societies determined the entities with an economic purpose to adopt measures and behaviors that would diminish the impact of the economic activity on these challenges. For this, the theory of legitimacy was developed in order to guide the process of disclosing economic, social, and environmental aspects [28]. These disclosures may affect the financial performance and value of the reporting entities.…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

The Impact of Corporate Governance Mechanism over Financial Performance: Evidence from Romania

et al. 2021

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In the context of the globalization and internationalization of economies, to efficiently attract financial and intellectual capital that is necessary for business sustainability, the mechanisms of corporate governance have to be based on gaining the trust of all the interested parties. These objectives require an organizational culture and a climate which is based on correctness, responsibility, transparency, and efficiency, in which ethical principles govern the spread of behaviors in the entire entity. This research identifies the relation between the corporate governance and the entities’ financial performance using the specific context of Romania. The findings of this study reveal new insights on the corporate governance and financial performance based on a sample of companies listed on the Bucharest Stock Exchange. The results show a positive correlation between the net accounting results, earnings per share, and the duality of the CEO, and a negative correlation between price per share and the duality of the CEO.

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Legitimacy Theory

Cited by 74 publications

References 0 publications

The impact of corporate social responsibility on stock price volatility of the US banks: a moderating role of tax

The impact of corporate social responsibility on stock price volatility of the US banks: a moderating role of tax

Impact of COVID-19 pandemic on financial reporting and disclosure practices: empirical evidence from Bangladesh

The Impact of Corporate Governance Mechanism over Financial Performance: Evidence from Romania

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