Title: Restoring reputation and repairing legitimacy: a case study of impression management in response to a major risk event at Allied Irish Banks plc

Authors: Philip Linsley, Peter Kajuter

Addresses: The York Management School, University of York, Heslington, York, YO10 5DD, UK. ' University of Munster, Chair of International Accounting, Universitatsstr.14-16, D-48143 Munster, Germany

Abstract: Risk events can cause significant damage to a firm|s reputation and legitimacy. From the perspective of legitimacy theory, there are four broad strategies to restore reputation and repair legitimacy in response to a risk event. The annual report is a potential vehicle for communicating these strategies to the firm|s stakeholders and, therefore, the discretionary disclosures explaining the strategies implemented can be regarded as a means for managing reputational risk. This paper analyses annual report disclosures published in response to a major risk event at Allied Irish Banks plc. The empirical results suggest that legitimacy theory can usefully explain the disclosures. However, the findings from the case analysis also indicate that the disclosures made by Allied Irish Banks plc were not wholly effective in re-establishing legitimacy and thereby demonstrate the need for effective internal control and risk management systems that reduce the likelihood of risk events occurring in the first place.

Keywords: disclosure; internal control; impression management; legitimacy theory; risk management; reputation; Allied Irish Banks.

DOI: 10.1504/IJFSM.2008.016699

International Journal of Financial Services Management, 2008 Vol.3 No.1, pp.65 - 82

Published online: 16 Jan 2008 *

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