Distinguishing Legitimacy Theory from Positive Accounting Theory Some writers have suggested that the propositions generated

by legitimacy theory are very similar to the propositions generated by the political cost hypothesis which is developed through Positive Accounting Theory Differences: 1. legitimacy theory relies on the notion of a 'social contract' with society and predicts that management will adopt particular strategies to assure the society that the organization is complying with the society's values, norms and expectations. Unlike Positive Accounting Theory, legitimacy theory does not rely upon the economics-based assumption that all action is driven by self-interest (tied to wealth maximization). Unlike Positive Accounting Theory, legitimacy theory makes no assumptions about the efficiency of markets, such as the capital market and the market for managers.

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