Legitimacy of Global Accounting Standards: A New Analytical Framework

This paper is a conceptual examination of global expansion of International Financial Reporting Standards (IFRS) and perceives its expansion as gaining legitimacy in the global financial regulatory field. From this stance, this paper assumes a pragmatic definition of legitimacy, which originally had many definitions that had become ‘motivation for acceptance among multi-stakeholders,’ and sets up a Legitimacy model that constitutionally analyzes legitimacy of global accounting standards. Drawing upon institutional theory, this study intends to provide a new perspective to accounting literature. The Legitimacy model constitutionally analyzes legitimacy of the global accounting regulatory system, which we can assume is a multilayer network, and separates legitimacy of IFRS and IASB, which have not necessarily been separated in previous studies. By employing the concept of reflexivity, this model clarifies the mechanism in which both the legitimacies of accounting standards and of the standard setters interact to convey legitimacy of global accounting standards as a system. The main contributions of this paper are analyzing accounting standards as global standards and/or a global institution and providing a new analytical framework to legitimacy of global accounting standards.