An Analysis of the Wealth Effects of Green Marketing Strategies

Event study methodology is used to examine the wealth effects, or stock 1993; Shrum, McCarty, and Lowrey, 1995). As these perceptions have increased, the green movement has received a great price reactions, to corporate announcements of green marketing activities. Two procedures for measuring stock price reactions and two different degree of attention by the public in such areas as the media, the political arena, special interest groups, and consumers tests of significance are used in the study. The results for the sample of 73 firms show that the market value for the average firm in the sample (Vandermerwe and Oliff, 1990; Zimmer, Stafford, and Stafford, 1994). declines by 3.14% during the period from 10 days prior to 10 days after the news is announced. Announcements related to green products, recycling The movement has also begun to receive more attention by managers who are increasingly moving from defensive and efforts, and appointments of environmental policy managers result in insignificant stock price reactions. However, announcements for green reactive responses to the concern toward pro-active actions (Vandermerwe and Oliff, 1990). Pro-active actions related to promotional efforts produce significantly negative stock price reactions. Sampling by financial and operational characteristics shows that firms environmental issues is a subset of the well-documented area of environmental management (see Clark, Varadarajan, and with higher growth in earnings, larger firms, and firms with higher advertising-to-sales ratios experience relatively less negative stock price reacPride, 1994), which has been successfully applied to marketing (e.g., the seminal article by Zeithaml and Zeithaml, 1984). tions. Managerial implications of the results and directions for future research are also presented. J BUSN RES 2000. 50.193–200.  2000 Environmental management assumes that firms can, to a degree, create, shape, or manage, operating environments. It Elsevier Science Inc. All rights reserved. attempts to control, change, influence, or adapt firm inputs over which external groups have some amount of control. Firms’ actions relative to environmental issues should conIn recent years, environmentalism, or the green movement, sider the firms’ relationships to numerous stakeholder groups, such as stockholders, employees, customers, suppliers, finanin the United States has grown in relative strength as a mainstream concern (Ottman, 1993). The green movecial institutions, governments, interest groups, and the general public. Stakeholders may feel that management actions, such ment has been viewed as a significant social movement in recent years (Banerjee, Gulas, and Iyer, 1995). Numerous as those related to the green movement, reflect the perceptions of various stakeholders (Zinkhan and Carlson, 1995). Howaspects of everyday life, such as politics, consumerism, technology, product purchases and consumption, marketing, ever, as Zinkhan and Carlson (1995) point out, not all stakeholder groups will concurrently be pleased with management manufacturing, and resources (Zinkhan and Carlson, 1995; Zimmer, Stafford, and Stafford, 1994), are affected by the actions. Also, as Clark, Varadarajan, and Pride (1994, p. 35) state, “[t]he extent to which the interests of businesses are movement. The effects on everyday life are also widespread, because in a global economy, changes contributing to developcompatible with, or opposed to, the interests of other individuals, groups, and organizations is a point of much controversy.” ment of environmental policies and strategies are not limited to national boundaries. Some of the changes in the United To ensure that they are not being mislead by firms, stakeholders may use different methods with which to oversee States result from Americans’ increasing perceptions of themselves as environmentalists (Carlson, Grove, and Kangun, management actions regarding the environment (Coddington, 1993). Government, at all levels, impose new laws, regulations, and proposals on firms in response to increasing enviAddress correspondence to: Lynette Knowles Mathur, Department of Marketing, Southern Illinois University, Carbondale, IL 62901-4629. ronmental concern, and may suggest possibly greater controls