Managing Legitimacy Risk in a Crisis Through Corporate Reporting

Contemporary organisations face increasing uncertainty from events such as geopolitical tensions, natural disasters, and pandemics that are beyond their control. These events create both financial and non-financial risks, including threats to organisational legitimacy. Drawing on legitimacy theory, this study examines how New Zealand healthcare companies use corporate reporting to manage the legitimacy risk posed by the COVID-19 pandemic. The sample comprises the entire population of 15 healthcare companies listed on the New Zealand Stock Exchange (NZX). We collected data from the annual reports of health companies between 2020 and 2022, a period characterised by significant disruption due to the COVID-19 pandemic. We also obtained additional data from media reports published during the same period. We analysed the data using thematic analysis. The findings reveal that health companies, rather than adopting a one-size-fits-all approach, shifted their reporting across different phases of the crisis to manage legitimacy risk. In the initial phase, when uncertainty and stakeholder concerns heightened legitimacy risks, health companies adopted an extensive reporting approach and disclosed both positive and negative information. As the crisis escalated, reporting shifted to a bolstering approach, focusing largely on positive information. In the recovery phase, reporting moved toward a normalising approach, signalling a return to the pre-pandemic status quo. The findings suggest that health companies use corporate reporting strategically to manage legitimacy risk during crises.