Purpose As global compliance regulation increases, compliance management is becoming increasingly important for the sustainability of multinational enterprises. From a dual legitimacy perspective, this paper aims to explain whether and why firms adopt symbolic or substantive compliance strategies following overseas violations. Design/methodology/approach Based on a sample of Chinese listed companies that engaged in overseas violations between 2009 and 2022, hierarchical regression analysis and the bootstrapping method were used to test hypotheses. Findings The results indicate that the severity of the overseas violation and the cumulative number of prior violations negatively affect a firm’s subsequent symbolic compliance but positively affect subsequent substantive compliance. External legitimacy decline mediates this process, while internal legitimacy and external regulatory stringency play interactive moderating effects. Practical implications The findings indicate that firms should be aware of the negative impact of overseas violations on their external legitimacy. Firms with serious and frequent violations should take more substantive compliance actions and enhance the internal legitimacy of compliance management. Policymakers should effectively combine stringent compliance regulations with compliance incentives to promote firms’ shift from symbolic to substantive compliance. Originality/value This paper extends institutional theories that emphasize the impact of external legitimacy on corporate compliance management. By incorporating both internal and external legitimacy into a unified framework, this paper contributes to the corporate compliance theory from a dual legitimacy perspective and offers insights into the differences in firms’ symbolic and substantive compliance levels following overseas violations.
Chen et al. (Thu,) studied this question.