Do organisations in developing economies legitimise their level of profit? Evidence from Fiji

Abstract

Purpose

This paper aims to investigate whether organisations in developing economies legitimise their level of profit.

Design/methodology/approach

Organisations’ level of profit is evaluated against the readability of sections of information available in the corporate annual reports. These sections include the Chairman’s Report, the Chief Executive Officer Report and the Notes to the Accounts.

Findings

More profitable organisations report more readable information in their corporate annual reports. Information in the non-mandatory sections of the report (Notes to the Accounts) is more readable compared to the information in the mandatory sections of the report (Chairman’s Report). Larger organisations report more readable information. Public Enterprises report more readable information compared to the Publicly Listed Companies.

Research limitations/implications

Organisations in the developing economies are aware of their role in their society. They respond to instances of possible violation of the implied social contract by sharing information in ways that relays news in certain ways.

Practical implications

Evidence of presence of legitimising activities by organisations would imply the need to strengthen the regulatory and monitoring guidelines to ensure efficient use of society’s resources and a fair rent charge for the utilities.

Social implications

There is a greater need to monitor and question organisations’ level of earned profit to ensure it is necessary to maintain their operations.

Originality/value

This study is the first attempt to investigate organisations’ immediate legitimising activities in relation to their reported profit.

Citation

Prasad, A., Green, P. and Heales, J. (2016), "Do organisations in developing economies legitimise their level of profit? Evidence from Fiji", Accounting Research Journal, Vol. 29 No. 1, pp. 59-80. https://doi.org/10.1108/ARJ-08-2014-0065