Legitimacy Theory
Financial Dictionary — Accounting Theory
Definition
Legitimacy theory posits that corporations are bound by a social contract in which corporations agree to perform various socially desirable actions in exchange for approval of their goals and other rewards, ultimately ensuring their continued existence.
Use cases, Example & Why it matters
Use cases
- Used to explain the concept in accounting and business contexts.
- Used when training staff or documenting procedures and policies.
- Used when training staff or documenting procedures and policies.
Example
- Example: Teams reference **Legitimacy Theory** when defining terms in manuals, policies, or training materials.
Why it matters
- Why it matters: Improves clarity and consistency across documentation and decision-making.