Article

Effectiveness of value congruent disclosures and firm credibility in mitigating legitimacy threats

Details

Citation

O’Neill JJ, Bondy K & Hang H (2022) Effectiveness of value congruent disclosures and firm credibility in mitigating legitimacy threats. Accounting Forum, 46 (1), pp. 1-29. https://doi.org/10.1080/01559982.2021.1889790

Abstract
This paper examines whether value congruent framing in firm disclosures, and firm credibility, help to repair or restore legitimacy following a legitimacy-threatening event. The methodology consists of two experiments. First, a pretest assesses whether participants judge negative information in a news article about a firm as a legitimacy-threatening event. Second, a main study determines whether participants’ legitimacy judgements and intention to oppose the firm are influenced by firm credibility and value congruent disclosures. Our findings demonstrate that firm credibility, in the form of past performance, partially repairs judgements of legitimacy and fully mitigates intention to oppose the firm. However, value congruent disclosures, in the form of firm messages that align with values strongly held by individuals making the legitimacy judgement, do not influence legitimacy judgements or behavioural intentions after a legitimacy-threating event, even when firm credibility is high. Taking both value congruence and firm credibility into consideration, this research indicates something rather challenging – value congruent disclosures do not matter but firm credibility does. The study contributes to the debate on the relative importance of what firms say compared with what they do by demonstrating the inefficacy of disclosures (what firms say) and, instead, the importance of firm credibility (what firms do) in legitimacy.

Keywords
Legitimacy; stakeholder judgements; environmental values; experimental study; firm credibility; disclosure

Journal
Accounting Forum: Volume 46, Issue 1

StatusPublished
FundersUniversity of Bath
Publication date31/12/2022
Publication date online04/03/2021
Date accepted by journal09/02/2021
URLhttp://hdl.handle.net/1893/34948
PublisherInforma UK Limited
ISSN0155-9982
eISSN1467-6303

People (1)

Dr Krista Bondy

Dr Krista Bondy

SL in Sustainable & Responsible Business, Management, Work and Organisation