The aim of this study is to examine the extent to which product returns motivate manufacturing firms to adopt closed-loop supply chain activities that influence the effectiveness of reverse supply chains. The hypotheses have been tested using data from a sample of 150 environmental management system ISO 14001 certified manufacturing firms in Malaysia through the census sampling approach. The results of the empirical test using LISREL Version 8.70 for the structural equation modeling support the fundamental explanation of the influence of the institutional forces towards the adoption of closed-loop supply chain activities and the effectiveness that can be reaped by the manufacturing firms from their adoption. These findings extend the prior research through the verification from the empirical survey on the importance of product returns in the adoption of closed-loop supply chain activities, which eventually impacts the firm's effectiveness in the reverse supply chain. The findings also help managers to understand the factors that can improve the outcome of the adoption of closed-loop supply chain activities by intensifying the extent of involvement in product returns, which provides a valuable insight about a significant predictor of firm performance in reverse flow chains.