Banks are exposed to a wide range of risk in their every day operation and in response to this they have developed various tools and strategies in order to help avoid, measure, or manage these risks. These tools and strategies are not always successful which has lead to several well publicised crises including amongst others the Barings bank collapse, Allfirst fraud, Santander fraud and more recently the collapse of Northern Rock and its subsequent nationalisation. In order for society to permit their operation firms require legitimacy, where by its actions must conform to cultural and social norms (Suchman 1995). Legitimacy and trust are vitally important and central to bank operations (Linsley and Kajuter 2008) therefore society is more likely to hold them to account (Ashforth and Gibbs 1990), meaning that in the occurrence of an legitimacy adverse risk event or crisis a banking organisation must enact strategies in order to repair and re-establish trust. Whilst legitimacy theory and the use of voluntary disclosures as part of a strategy for restoring organisational legitimacy and reputation has received academic attention (Linsley and Kajuter 2008) there has been limited research on banking disclosures (Linsley and Shrives 2006) and even less done on disclosures issued as a response to an adverse risk event or crisis. The only previous study in this area (see Linsley and Kajuter 2008) focused solely on disclosures located in the annual report but in the concluding remarks identified that the annual report is not the only risk disclosure vehicle and that future research should consider looking at disclosures issued through alternative communication methods. This study therefore will be on the use of disclosures in alternative communication methods (as suggested by Linsley and Kajuter (2008)) in the event of an organisational crisis. The research will aim to add to the still evolving academic understanding of the use of risk disclosure, as well as any part it may play in organisational legitimacy repairing strategies. This exploratory research may also help to identify possible new areas for further study. 3 This study will attempt to achieve these aims by comparing and contrasting Northern Rock Plc‘s before and after their spectacular collapse in 2007 to identify any changes in their risk disclosure in press releases, which have been highlighted as a potential candidate for research in past studies (see Lebar 1982) that, as with most others, have focused on disclosures solely in the annual report. The Northern Rock Plc collapse caused by the lack of wholesale market finance resulting from the 2007 subprime crisis was widely reported and caused substantial damage to the banks legitimacy. The study will first compare press release disclosures in the periods before and after the crisis, and if any changes are found then it will attempt to identify whether the changes were part of a strategy formulated to re-legitimise the bank or not. First the chapter comprises a review of the existing risk, risk disclosure and legitimacy theory literature as well as a definition of key concepts and background to Northern Rock and its legitimacy crisis. Secondly, the research methods are explained, hypotheses developed and choice of press releases for the basis of the study is justified. Finally, the results are analysed and finally conclusions are drawn and suggestions for further research are made
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