An analysis of the wealth effects of green marketing strategies

Event study methodology is used to examine the wealth effects, or stock pri ce reactions, to corporate announcements of green marketing activities. Two procedures for measuring stock price reactions and two different 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 declines by 3 .14% during the period from 10 days prior to 10 days after the news is anno unced. Announcements related to green products, recycling efforts, and appo intments of environmental policy managers result in insignificant stock pri ce reactions. However, announcements for green promotional efforts produce significantly negative stock price reactions. Sampling by financial and ope rational characteristics shows that firms with higher growth in earnings, l arger firms, and firms with higher advertising-to-sales ratios experience r elatively less negative stock price reactions. Managerial implications of t he results and directions for future research are also presented. (C) 2000 Elsevier Science Inc. All rights reserved.