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Identification of three additional proxy measures relevant to your theoretical constructs. Be sure to identify measures that you will be able to collect for your assigned companies.
Choice of proxies from the data supplied and your additional measures: complete the table showing the proxy, the related theoretical construct, and whether it is a dependent (DV), independent (IV), or control variable (CV).
I certify that I have carefully reviewed the university's academic misconduct policy. I understand that the source of ideas must be referenced and that quotation marks and a reference are required when directly quoting anyone else's words.
* In ACC620 you were assigned to a theoretical perspective (Agency Theory, Stakeholder Theory, or Legitimacy Theory)
Unless otherwise approved by the course coordinator, all students will be considering the general issue of the Voluntary Disclosure of Environmental Performance.
Literature Review – Summary
Legitimacy is a common perception that the activities of an entity are appropriate in accordance with the social norms and belief system (Tilling 2004). Companies take effort to manage their legitimacy to obtain continued inflow of capital, employees and customers required for the viability of operations as well as prevent regulatory implications and pre-empts from disruptive actions arising from external stakeholders. Through the mitigation of potential challenges, legitimacy offers managers autonomy over decisions related to conducting business.
When companies engage in voluntary disclosure of corporate information like environmental performance, it obtains incentives with the disclosure of optimistic details as it acts as a differentiator between themselves and its competitors or bad performers thereby, making it a preferable company. Companies which have proactive environmental strategy receives incentives from investors and other stakeholders with the voluntary disclosure of more environmental information (Clarkson et al. 2008).
Researchers have found that the increase in the disclosure of more positive environmental information is a result of those companies' attempts to mitigate risks arising from negative impact of remediation related disclosure. The underlying argument is that companies may be subject to threats to their legitimacy in case of failure to comply with the demands of society, especially related to acceptability of the company due to inappropriate environmental behaviour. This would hamper its ability to obtain necessary resources for operations. As well as, the stakeholders from the society such as employees, consumers, investors, professional and regulatory agencies would refuse to deal with such companies.
Legitimacy is significant for the analysis of relationships between companies and their environment. There is a growing concern among companies to generate congruence between the social values accompanying their actions and their acceptable behaviours in the social system (Mousa & Hassan 2015). Due to its dynamic nature, the societal norms tend to changes with time which requires the companies to be responsive. If the company fails to perform within the acceptable level of the society, it will lead to public/ stakeholder dissatisfaction leading to pressure from the society or face legal consequences.
Legitimacy theory is associated with corporate behaviour in responding to the divergent demands of interested parties with the legitimisation of its activities. It is often considered as the engagement of companies to publicise or report their performance to exert influence over the public perception of the company. Researchers have noted that 'society grants legitimacy and power to business'. However, any entity which fails to use this power in a responsible manner would lose its control over the society.
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