An Analysis of the Wealth Effects of Green Marketing Strategies
Section snippets
Research Issues
Environmental issues had previously been primarily viewed by managers as constraints or operating problems and, thus, managers' approaches in dealing with them had usually been reactive (Azzone and Bertele, 1994). More recently, pro-active changes in management attitudes toward the issues have been taking place with individual firms (Ottman, 1993). Only the strong commitment of senior management, through pro-active changes, can cause the firm's stakeholders to realize that the firm has
Measurement of Excess Returns
Event study methodology, as introduced by Fama et al. (1969) and further developed by Brown and Warner (1985), has been used by a number of researchers in marketing to examine the market valuation effects associated with marketing strategies (see, for example, Mathur and Mathur, 1995), who studied the effects of advertising slogan changes, and Chaney, Devinney, and Winer (1991), who studied the effects of new product introduction).
Normal returns in the market are assumed to be modeled by the
Conclusion
The overall results of this study indicate that, in general, corporate news regarding green marketing activities is not well received by investors. The average firm in the sample loses a statistically significant 3.14% of its market value in the 20 days surrounding the announcement date.
Four subsamples of announcements, classified by major marketing strategies, showed slightly different results. For three subsamples, those related to announcements of green products, recycling efforts, and
Managerial Implications
The results of this study indicate that, in general, investors have reservations about corporate green marketing activities. However, investors seem to feel more comfortable with green marketing activities by firms that have relatively better financial performance, as measured by growth in earnings per share, by firm size, and by the advertising-to-sales ratio. Firms with relatively better financial performance may enjoy credibility with investors. Thus, their green marketing activities may be
Limitations and Future Research
This is, to our knowledge, the first study to examine the wealth effects of green marketing activities. As such, many research issues that would enrich our understanding of the interplay between corporate marketing strategies and their impact on stock prices are not covered in the present analysis. For example, research by Chaney, Devinney, and Winer (1991) indicates a positive stock price reaction to new product announcements. Similarly, Mathur and Mathur (1996) observe a positive stock price
Acknowledgements
The authors thank three anonymous referees and JBR Special Issue Editors James Verbrugge and George M. Zinkhan for their helpful comments on earlier drafts of this article, and Patty Doolin for her assistance with the preparation of the manuscript. This research was supported by a College of Business Scholars Program Research Grant to Lynette Knowles Mathur.
References (26)
- et al.
Exploiting Green Strategies for Competitive Advantage
Long Range Planning
(1994) - et al.
Using Daily Stock ReturnsThe Case of Event Studies
Journal of Financial Economics
(1985) - et al.
Environmental ManagementThe Construct and Research Propositions
Journal of Business Research
(1994) - et al.
Customers Drive Corporations Green
Long Range Planning
(1990) - et al.
Green IssuesDimensions of Environmental Concern
Journal of Business Research
(1994) - et al.
Shades of GreenA Multidimensional Analysis of Environmental Advertising
Journal of Advertising
(1995) - et al.
Corporate Realities and Environmental TruthsStrategies for Leading Your Business in the Environmental Era
(1993) Green Marketing Begins with Green Design
Journal of Business & Industrial Marketing
(1993)- et al.
A Content Analysis of Environmental Advertising ClaimsA Matrix Method Approach
Journal of Advertising
(1993) A Plan for Environmental Packaging
Journal of Business Strategy
(1992)