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Echoes of Environmental Performance: How Firms Respond to Feedback in the Shadow of Regulation

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  • Hanna Lee

Abstract

Environmental performance feedback (EPF) triggers cognitive processes that influence corporate decision‐making, yet how firms translate this feedback into environmental information disclosure (EID) remains unexplored. Drawing on behavioral and legitimacy perspectives, we examine the associations of positive and negative performance feedback with EID levels and the moderating effect of regulatory stringency. Analyzing a dataset of 875 observations from 175 global manufacturers, we find that both positive and negative performance feedback increases EID levels. Crucially, these associations weaken under higher regulatory stringency. Our evidence indicates that EPF guides firms' disclosure strategies by indicating opportunities or threats to their legitimacy. Meanwhile, stringent environmental regulations establish a minimum baseline of social acceptance, thereby reducing the need for firms to engage in extensive disclosure to preserve their legitimacy. The results clarify the decision‐making dynamics that link EPF to EID and reveal how the regulatory condition moderates these disclosure behaviors, suggesting practical implications for firms seeking to balance compliance and legitimacy.

Suggested Citation

  • Hanna Lee, 2026. "Echoes of Environmental Performance: How Firms Respond to Feedback in the Shadow of Regulation," Business Strategy and the Environment, Wiley Blackwell, vol. 35(2), pages 2103-2121, February.
    • Handle: RePEc:bla:bstrat:v:35:y:2026:i:2:p:2103-2121
    DOI: 10.1002/bse.70290
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    References listed on IDEAS

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