Navigating the haze: Environmental performance feedback and CSR report readability

Abstract

Despite the prevalence of comprehensive discussions on coping strategies for financial performance feedback, firms’ responses to environmental performance feedback, which possess distinct frames compared to financial performance feedback, remain insufficiently explored. To address this gap, our study explores how firms employ less readable reports in response to environmental performance feedback. We argue that firms receiving negative or positive feedback tend to produce reports with low readability, bewildering stakeholders, while those with environmental performance close to their aspirations are more likely to present clear, highly readable reports. Our findings indicate an inverted-U-shaped relationship between environmental performance feedback and corporate social responsibility report readability. Furthermore, we found that ascribed and achieved political connections have negative and positive moderating effects on this nonlinear relationship, respectively. Our arguments are supported by a sample of Chinese small and medium-sized enterprises from 2010 to 2017.