In search of legitimacy: a semiotic analysis of business model disclosure practices

Abstract

Purpose This paper aims to investigate how firms disclose the presentation and content of business model (BM) information in corporate reports to manage their legitimacy in response to European Directive 2014/95. Design/methodology/approach Legitimacy theory is used to identify disclosure strategies pursued by firms in reaction to the new regulation. To understand how firms adopt these strategic responses, semiotic analysis is applied to a sample of European companies’ reports through Crowther’s (2012) framework, which is based on a mechanism of binary oppositions. Findings Half of the sample strategically choose to comply with the European Union (EU) Directive regarding BM information through the use of non-accounting language, figures, and diagrams. Other firms did not disclose any substantive information but managed the impression of compliance with the regulation, while the remainder of the sample dismissed the regulation altogether. Research limitations/implications This study demonstrates how organisations use the disclosure of BM information in their corporate reports to control their legitimacy. The results support the idea that firms can acquire legitimacy by complying with the law or giving the impression of compliance with the regulation. This study provides evidence on the first-time adoption of the EU Directive, and therefore, future research can enlarge the sample and conduct the analysis over a broader time frame. Practical implications A more precise indication of the EU Directive regarding “where” firms should report BM information, “how” the description of a BM should refer to the environmental, social, governance (ESG) factors, and a set of performance measures to track the evolution of a company’s BM overtime is needed. Originality/value While there has been a notable amount of research that has applied content analysis methodologies to investigate the thematic and syntactic aspects of BM disclosure in corporate reports, only a few studies have investigated BM disclosures in relation to the EU Directive. Furthermore, the application of semiotic analysis extends beyond traditional content analysis methodologies because it considers the structure of the story at many levels, thus developing a more complete textual picture of how BMs are described, allowing an analysis of the reasons behind the disclosure strategies pursued by firms.

The revision of nonfinancial reporting directive: A critical lens on the comparability principle

“…The choice to use 2016 as the base of analysis is because of the opportunity to perform a comparison between two periods characterized by different degrees of legal provisions about nonfinancial reporting: voluntary in 2016 and mandatory in 2018. Finally, our sample size of 70 is consistent with prior studies about Directive 95/2014/EU (Di Tullio et al, 2019; Doni et al, 2019; Nicolo, Zanellato, Manes‐Rossi, & Tiron‐Tudor, 2020).…”

“…Our proxies are divided into report‐level, corporate governance‐level, and control variables (Table 2). The report characteristics to be considered are the degree of the adherence to the GRI Comprehensive option (Boiral, 2013; Sethi et al, 2017) and the overall number of pages that compose each report (Di Tullio et al, 2019; Melloni et al, 2017). The variables that describe corporate governance characteristics are BoD size, the percentage of independent directors involved within the BoD, CEO duality, the existence of a CSR committee, and the involvement of a Big 4 accounting firm within the assurance processes (García‐Sánchez, Gómez‐Miranda, David, & Rodríguez‐Ariza, 2019; Husted & de Sousa‐Filho, 2019; Muttakin, Khan, & Mihret, 2018; Naciti, 2019; Pucheta‐Martínez, Bel‐Oms, & Nekhili, 2019; Velte, 2017b).…”

“…CEO duality represents one of the main relevant topics related to the dichotomous relationship between organizational dynamics and nonfinancial performance (Lagasio & Cucari, 2019; Velte, 2019). In particular, prior studies have highlighted that the disclosure of nonfinancial activities by the CEO could be done for unethical purposes such as impression management and greenwashing (Cho, Laine, Roberts, & Rodrigue, 2015; Di Tullio et al, 2019). Furthermore, many academics have observed that CEOs are typically inclined to overestimate their beneficial nonfinancial activities to increase their reputation.…”

“…In particular, prior studies have highlighted that the first 5 years after the transposition of Directive 95/2014/EU have been characterized by different approach to nonfinancial reporting practices by business enterprises. Thus, despite the existence of common rules, the NFDs' transparency is influenced by the adoption of different reporting strategies driven by the exigence to be compliant with the law through a tick-box approach (Di Tullio, Valentinetti, Nielsen, & Rea, 2019;Doni et al, 2019;Pizzi, Venturelli, & Caputo, 2020). The nonfinancial restatements represent one of the main items that impact negatively on NFDs' comparability.…”

“…and the overall number of pages that compose each report(Di Tullio et al, 2019;Melloni et al, 2017). The variables that describe corporate governance characteristics are BoD size, the percentage of independent directors involved within the BoD, CEO duality, the existence of a CSR committee, and the involvement of a Big 4 accounting firm within the assurance processes (García-Sánchez, Gómez-Miranda, David, & Rodríguez-Ariza, 2019; Husted & de Sousa-Filho, 2019; Muttakin, Khan, & Mihret, 2018; Naciti, 2019; Pucheta-Martínez, Bel-Oms, & Nekhili, 2019;…”