TY - JOUR
T1 - Theoretical perspectives on corporate disclosure
T2 - A critical evaluation and literature survey
AU - Omran, Mohamed A.
AU - El-Galfy, Ahmed M.
N1 - Publisher Copyright:
© Emerald Group Publishing Limited.
PY - 2014/8/26
Y1 - 2014/8/26
N2 - Purpose - The purpose of this paper is to provide an extensive and critical overview of the theoretical perspectives used in the accounting disclosure literature including economic theories, political and social theories.Design/methodology/approach - The paper reviews and discusses in details the positive accounting theory (PAT), agency theory, signalling theory, political economy theory (PET), stakeholder theory, legitimacy theory and contingency theory to identify the situations suit each of these perspectives.Findings - The main finding shows that there is no universal theory applicable for all situations or societies. For example, PAT is probably used when a corporation believes that its primary responsibility is to use its resources and engage in activities designed to maximise its profits. On the other hand, the PET seems to better explain why some corporations appear to respond to government or public pressure for information about their social impact. The agency theory provides the required framework to evaluate accounting choices and disclosure decisions in market-based studies.While the legitimacy theory seems to be more suitable for multinational corporations working in developed/democratic countries, the stakeholder theory seems to be most suitable for multinational corporations working in developing/dictator countries; whereas a corporation can manage its stakeholders. The contingency theory supports our main finding that different theories are required for different situations, as it clearly indicates that management's preferences of reporting practices are related to the nature of environmental and organisational constraints rather than their relative income effects.Originality/value - The paper contributes to the limited body of literature concerning the accounting disclosure theories and to identify the main theoretical perspective that can be used in the accounting disclosure research.
AB - Purpose - The purpose of this paper is to provide an extensive and critical overview of the theoretical perspectives used in the accounting disclosure literature including economic theories, political and social theories.Design/methodology/approach - The paper reviews and discusses in details the positive accounting theory (PAT), agency theory, signalling theory, political economy theory (PET), stakeholder theory, legitimacy theory and contingency theory to identify the situations suit each of these perspectives.Findings - The main finding shows that there is no universal theory applicable for all situations or societies. For example, PAT is probably used when a corporation believes that its primary responsibility is to use its resources and engage in activities designed to maximise its profits. On the other hand, the PET seems to better explain why some corporations appear to respond to government or public pressure for information about their social impact. The agency theory provides the required framework to evaluate accounting choices and disclosure decisions in market-based studies.While the legitimacy theory seems to be more suitable for multinational corporations working in developed/democratic countries, the stakeholder theory seems to be most suitable for multinational corporations working in developing/dictator countries; whereas a corporation can manage its stakeholders. The contingency theory supports our main finding that different theories are required for different situations, as it clearly indicates that management's preferences of reporting practices are related to the nature of environmental and organisational constraints rather than their relative income effects.Originality/value - The paper contributes to the limited body of literature concerning the accounting disclosure theories and to identify the main theoretical perspective that can be used in the accounting disclosure research.
KW - Accounting disclosure practice
KW - Contingency theory
KW - Legitimacy theory
KW - Political economy theory
KW - Positive accounting theory
KW - Stakeholder theory
UR - http://www.scopus.com/inward/record.url?scp=84913614788&partnerID=8YFLogxK
U2 - 10.1108/ARA-01-2014-0013
DO - 10.1108/ARA-01-2014-0013
M3 - Article
AN - SCOPUS:84913614788
SN - 1321-7348
VL - 22
SP - 257
EP - 286
JO - Asian Review of Accounting
JF - Asian Review of Accounting
IS - 3
ER -