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The Pros And Cons Of Legitimacy Theory

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Theory that has been used the most related to environmental information is legitimacy theory (Islam and Deegan, 2008 ; Mokhtar et al., 2012 ; Chandok & Singh, 2017). Legitimacy theory explained the relationship between corporate social disclosure and communities as company are bound by the social contract to meet the communities’ expectations and changes (Juhmani, 2014). The company is said to be last longer if company activities would benefits their stakeholder instead of giving bad impact towards stakeholder or directly or indirectly harm them. Basically, legitimacy theory focuses on how company reacts to particular society (Sulaiman, Abdullah and Fatima, 2014). Legitimacy theory assumes company that subject to greater threatened legitimacy and public pressure may be beneficial to disclose environmental information (Chandok & Singh, 2017). Legitimacy gap will likely to occur when company performance is not turn out to be what has been expected. If there is a huge gap, it can be said that it may threaten the company image and reputation which will discontinue company business activities. It is agreed that one of the ways how companies react to the legitimacy gap is by disclosing environmental information in a way of to show they are environmentally responsible (Mokhtar et al., 2012). Legitimacy theory is considered in two perspectives. The ethical perspective indicates that corporations ‘do the right thing’ and the pragmatic perspective which views legitimacy as an

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