Accounting Theory: Legitimacy Theory and Stakeholder Theory

Accounting Theory 1
ACCOUNTING THEORY
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Accounting Theory 2
Table of Contents
Accounting Theory..........................................................................................................................3
Executive Summary.........................................................................................................................3
Introduction......................................................................................................................................3
Legitimacy Theory...........................................................................................................................3
Accounting, Auditing and Accountability Journal......................................................................5
Accounting, Accountability and Performance Journal................................................................6
Accounting and Finance John Wiley & Sons, Inc.......................................................................6
Stakeholder Theory..........................................................................................................................7
Accounting and Business Research Taylor & Francis Online.....................................................8
Internal Marketing Communication and Stakeholder Theory..................................................8
Accounting, Accountability and Performance Journal................................................................9
Conclusion.......................................................................................................................................9
References......................................................................................................................................11

Accounting Theory 3
Accounting Theory
Executive Summary
The accounting theories are typically those theories who provides information on how
certain organizations should be carrying out their activities. Such theories may include,
institutional theory, stakeholder theory, and legitimacy theory. The aim of this report is to
provide insight into two basic theories that is legitimacy theory and stakeholder theory. It will
focus on four articles which will provide an insight into the theories and the articles are indicated
in the paper below.
Introduction
The legitimacy theory and the stakeholder theory are the two accounting theories selected
for the report. However, the journals selected include Accounting, Accountability, and
Performance, Accounting and Business Research Taylor & Francis Online , Accounting and
Business Research Taylor & Francis Online and, Auditing and Accountability Journal. The
legitimacy theory is typically a theory of accounting which provides information on the key
activities and actions of particular organizations and this is usually in relation to social and
environmental issues. However, the stakeholder theory takes into the relationship between the
particular organization and the stakeholders. It emphasizes the need to identify the key
stakeholders of an organization and this includes their interests since they are elements in
determining the success or failure of a firm. The two theories of the accounting have been
discussed in more details in the paper below.
Legitimacy Theory
According to Dube and Maroun (2017 p.30), the actions and activities of various
organizations have been associated with legitimacy theory. Some of the activities usually relate
to certain aspects such as the social and environmental matters. The legitimacy theory depends

Accounting Theory 4
on the social contracts. It is expected of the different business enterprises to carry out their
activities with the aim of acting in a manner which is accepted by a particular community. An
organization which is able to act in an ethical manner will typically survive in the society for a
very long time and hence it has to operate depending on the expectations of the social contract.
An organization's legitimacy is an indication of how there is an existence of a social
contract between the organization and the community and this enables the organization to be
sustained for a long time. It is the duty of every particular organization to acknowledge that their
operations are those which are related to a value system which is consistent with the system of a
particular community. All the organizations must, therefore, consider the rights of every
particular individual that is the public at large and not just the rights of the shareholders
(WOSTMANN, VAN ZIJL, and MAROUN, 2017 p.100).
There are a variety of techniques which various organizations often use to obtain their
legitimacy. For example, an organization can get legitimacy through education and availing
information to the community on certain fundamental dynamics in their activities and operations.
When the perceptions of the society on the activities of an organization are changed, the
legitimacy can be obtained and this should not include the change of behavior (Deephouse,
Bundy, Tost and Suchman, 2017 .50). Additionally, an organization can obtain legitimacy
through the manipulation of the different views of a particular community and this typically
involves the diversion of the attention of the individuals in the society to specific issues which
could not be relating to their perceptions. For example, it could be an issue on the relationship of
the organization with the society on certain objectives such as the removal of information
considered to be negative to the public (Asmeri, Alvionita, and Gunardi, 2017 p.20).