On organisational legitimacy practices in developing economies : a profit and readability based approach

Prasad, Acklesh, Green, Peter, & Heales, Jon (2013) On organisational legitimacy practices in developing economies : a profit and readability based approach. In AFAANZ 2013 Conference, 4-7 July 2013, Perth, Western Australia.

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Abstract

In this study, we investigate whether organisations in developing markets legitimise their use of societal resources. We concur that organisations’ existence in developing markets is also part of a social contract. Within this implied contract, organisations are to leverage resources in an equitable manner, allowing fair distribution of benefits to society and themselves. In this setting, we propose that the level of profit is the best indicator of the outcome of use of resources, and is subject to numerous societal emotions in developing economies. We also propose that readability of narratives relating to a level of profit is the best measure of organisations’ immediate legitimacy activities. Five-year data on profitability and readability of sections of corporate annual reports from 30 organisations reveals that organisations with higher profits present more readable narrative disclosures in their annual reports. This relationship is more evident in larger companies and with the public enterprises. These outcomes imply that organisations communicate their profit-related information in ways to manage an appropriate impression and legitimize a level of profit. The study’s outcomes also imply that authorities need to monitor organisations rights to protected existence continuously, as their legitimacy efforts suggest that higher levels of profit may be an outcome of potential misuse of resources.

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ID Code: 63388
Item Type: Conference Paper
Refereed: Yes
Keywords: developing economies, level of profit, readability scores, mandatory disclosures, nonmandatory disclosures, impression management
Subjects: Australian and New Zealand Standard Research Classification > COMMERCE MANAGEMENT TOURISM AND SERVICES (150000) > ACCOUNTING AUDITING AND ACCOUNTABILITY (150100) > Accounting Auditing and Accountability not elsewhere classified (150199)
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Current > Schools > School of Accountancy
Copyright Owner: Copyright 2013 Please consult the authors
Deposited On: 16 Oct 2013 02:33
Last Modified: 19 Jul 2014 14:26

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