ABSTRACT
This chapter introduces stakeholder theory and legitimacy theory. Stakeholder theory suggests organizations must be accountable not only to investors but also towards a multiplicity of stakeholder, whose expectations and interests can affect or be affected by the organizations’ actions. We provide an overview of the descriptive, normative and instrumental approaches to stakeholder theory, along with a classification of stakeholders and a comparison with agency theory. We then define the concepts of legitimacy and social contract, outline the main literature on legitimacy theory and compare it to stakeholder theory. Finally, we discuss both stakeholder and legitimacy theory in the context of Behavioural Accounting Research and provide suggestions for future research.
