The relevance of theories of political economy to the understanding of financial reporting in South Africa: the case of value added statements

Chris Van staden

Accounting Forum, 2003, vol. 27, issue 2, 224-245

Abstract: In South Africa there has been a sustained increase in the level of publication of the value added statement since the mid 1980s. Currently nearly 50% of all companies listed on the Johannesburg Stock Exchange publish a value added statement as part of their annual financial statements and a much higher proportion of the top 100 companies in the industrial sector publish the statement. The aim of this research is to contribute towards an understanding of the motivation for the sustained high level of publication of the value added statement, which is confined to South Africa at present.The findings indicate that legitimacy theory and the political economy of accounting theory provide the best explanation for the continued publication of the statement in South Africa. Evidence was also found that supports the use of the value added statement for legitimising current action and behaviour rather than reporting objectively on social issues. This paper extends the literature on legitimacy theory to a social disclosure, the publication of the value added statement. It also contributes to the literature by showing that legitimising behaviour is also observed when a major political change brings uncertainty as to society's expectations of the economic system and the role of private enterprise.

Date: 2003
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DOI: 10.1111/1467-6303.00103

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