Abstract

"The legitimacy theory and stakeholder theory" have sought to explain why organizations voluntarily disclose their information in annual reports based on some social responsibilities. Two theories are, in large part, derived from broader political economy perspective. Legitimacy is a dynamic process implying that stakeholder groups are constantly evaluating their products, methods and goals of the organization. According to stakeholder theory, corporations have substantially grown in size and they have such a profound impact on society that they need to pay more attention to other sectors of society than shareholders in order to be both responsible and accountable for it. Failure to modify the organization's activities will lead to an increase in the gap between the changed expectations of the society and the products of the organization and thus its legitimacy will be threatened. Issues raised in social responsibility have turned into financial ones. Corporate social responsibility and its associated disclosure are among the essential factors for the survival of firms, because all companies develop a long-lasting relationship with the society and consequently it ensures the survival of the companies in the long run. In this paper, the theory of political economy was firstly explained and the theory of legitimacy and stakeholder theory were then discussed and finally, its role in corporate social responsibility was described.