Marketing Strategies
Lynette Knowles Mathur
SOUTHERNILLINOISUNIVERSITY ATCARBONDALE
Ike Mathur
SOUTHERNILLINOISUNIVERSITY ATCARBONDALE
Event study methodology is used to examine the wealth effects, or stock 1993; Shrum, McCarty, and Lowrey, 1995). As these percep-tions 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 Staf-ford, 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
adver-tising-to-sales ratios experience relatively less negative stock price reac- Pride, 1994), which has been successfully applied to market-ing (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 RES2000. 50.193–200. 2000 Environmental management assumes that firms can, to a de-gree, 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
con-I
n recent years, environmentalism, or the green movement, sider the firms’ relationships to numerous stakeholder groups, such as stockholders, employees, customers, suppliers, finan-in the United States has grown finan-in relative strength as amainstream concern (Ottman, 1993). The green move- cial 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). How-aspects of everyday life, such as politics, consumerism,
tech-nology, product purchases and consumption, marketing, ever, as Zinkhan and Carlson (1995) point out, not all stake-holder 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 develop- compatible with, or opposed to, the interests of other individu-als, 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, stake-holders may use different methods with which to oversee States result from Americans’ increasing perceptions of
them-selves as environmentalists (Carlson, Grove, and Kangun, management actions regarding the environment (Coddington, 1993). Government, at all levels, impose new laws, regula-tions, and proposals on firms in response to increasing
envi-Address correspondence to: Lynette Knowles Mathur, Department of
Mar-keting, Southern Illinois University, Carbondale, IL 62901-4629. ronmental concern, and may suggest possibly greater controls
Journal of Business Research 50, 193–200 (2000)
2000 Elsevier Science Inc. All rights reserved. ISSN 0148-2963/00/$–see front matter
should firms not modify behaviors. Consumers tend to re- strong commitment of senior management, through pro-active spond more favorably to firms with environmentally conscious changes, can cause the firm’s stakeholders to realize that the images (Carlson, Grove, and Kangun, 1993), yet an over- firm has sincerely made the green movement a priority (Ott-whelming percent of the public feels that firms are not suffi- man, 1993). Based on this discussion, the null hypothesis can ciently concerned about important environmental issues be stated as:
(Davis, 1994). Capital markets often demand “green audits”
H1: Announcements of green marketing activities will not of firms; firms that do not have environmentally sound
pro-result in stock price reactions. The alternative hypoth-grams in place may be denied funds.
esis is that announcements of green marketing strate-A significant stakeholder in the publicly-held corporation
gies will not be viewed favorably by investors. is the stockholder. Azzone and Bertele (1994) note that
stock-holders, either directly or through “ethical” funds, may limit Within functional areas a firm may approach the green their investments to firms with environmental performance. movement at differing degrees, perhaps depending on man-Anecdotal evidence by Ottman (1993) suggests that, by green- agement’s strength of commitment to the green movement ing their operations, involving their employees, and communi- and its dedication of sufficient resources to the relevant activi-cating their goals to all corporate stakeholders, companies ties. For example, Mendleson and Polonsky (1995, p. 4) in-may be able to achieve cost savings, gains in employee morale, dicate that green marketing initiatives may range from “re-and happier shareholders. positioning existing products without changing product Of special interest is green marketing, or marketing strate- composition” to “modifying existing products to be less envi-gies that “appeal to the needs and desires of environmentally ronmentally harmful” to “modifying the entire corporate cul-concerned consumers” (Zinkhan and Carlson, 1995, p. 1). ture to ensure that environmental issues are integrated into This article extends the literature to date on green marketing all operational aspects” to “the formation of new companies [see, e.g., the articles in the special issue ofJournal of Advertising that target green consumers and only produce green prod-24(2)(1995)]. The literature on this topic has sought to extend ucts.” Bhat (1993, p. 26) indicates that a green product can the conceptual and ethical dimensions of environmental mar- seldom withstand public scrutiny unless green design was keting, has identified corporate strategies for green marketing, involved, which would affect input materials, manufacturing has analyzed environmental advertising claims, and has tried processes, packaging, and disposal methods. The null hypoth-to identify consumer responses hypoth-to corporate green marketing. esis can be stated as:
While much of this research casts green marketing in a positive
H2: No stock price reaction will be observed for announce-light, some researchers have adopted a more cautionary
ap-ments related to green products. proach. For example, Casey (1992) points out that consumers
are unwilling to pay more for green products. Similarly, Easter- Consumers may well provide not only opportunities, but ling, Miller, and Weinberger (1995) point out that, regarding also challenges, for firms concerned with environmentalism. green marketing, there is a gap between consumer intent and While environmental compatibility of products may be a factor
consumer action. in consumer buying behavior (Azzone and Bertele, 1994),
The above discussion suggests that there is no clear evi- consumer interest in “green” products has not strongly and dence regarding the effectiveness of corporate green marketing successfully translated into actual purchases of green products strategies. This article seeks to fill this void in the literature (Easterling, Miller, and Weinberger, 1995). Some studies indi-by examining the stock price reactions to corporate announce- cate consumers are willing to pay more for environmentally ments related to green marketing, a topic that has not been friendly products (Mendleson and Polonsky, 1995), while empirically researched previously. Four categories of green others report that consumers are unwilling to pay a premium marketing—green products, recycling, green promotions, and for green products or green packaging (Kangun, Carlson, and appointments of environmental policy managers—are ana- Grove, 1991). The discussion here suggests:
lyzed in detail. The analysis is conducted through the use of
H3: Significant stock price reactions will not be observed event study methodology, which is a causal analytical
proce-for announcements related to recycling efproce-forts. dure (see, e.g., Brown and Warner, 1985).
Stakeholder interest in firms claiming to be environmen-tally responsive is affected by information they receive about
Research Issues
green products or other business aspects related to the greenmovement. Complete, balanced, objective, and truthful infor-Environmental issues had previously been primarily viewed
mation on environmental issues is strongly valued by stake-by managers as constraints or operating problems and, thus,
holders (Bennet, Freierman, and George, 1993). Information managers’ approaches in dealing with them had usually been
about firms’ activities related to the movement is sometimes reactive (Azzone and Bertele, 1994). More recently, pro-active
provided by one stakeholder group, such as environmental changes in management attitudes toward the issues have been
Most consumers, however, find information on the green H8: We would expect to see more pronounced negative reactions for firms with lower advertising-to-sales movement in the mass media (Iyer and Banerjee, 1993),
pri-ratios. marily through information provided by firms through their
advertising. The volume of green advertising and environmen-tal advertising claims has dramatically increased as consumer
Methodology and Data
interest in the environment has increased (Banerjee, Gulas,
and Iyer, 1995; Carlson, Grove, and Kangun, 1993; Kangun,
Measurement of Excess Returns
Carlson, and Grove, 1991). Yet, many consumers are becom- Event study methodology, as introduced by Fama et al. (1969) ing more confused by environmental claims in advertising, and further developed by Brown and Warner (1985), has been especially those that are considered misleading, or even decep- used by a number of researchers in marketing to examine the tive (Carlson, Grove, and Kangun, 1993; Kangun, Carlson, market valuation effects associated with marketing strategies and Grove, 1991), and, thus, they are distrustful of environ- (see, for example, Mathur and Mathur, 1995), who studied mental claims in general (Shrum, McCarty, and Lowrey, the effects of advertising slogan changes, and Chaney, Devin-1995). This discussion suggests the null hypothesis: ney, and Winer (1991), who studied the effects of new product
introduction).
H4: That announcements of green promotion will not
re-Normal returns in the market are assumed to be modeled sult in significant stock price reactions. The alternative
by the ordinary least squares market model as in Eq.(1): hypothesis is that the announcements will lead to
negative stock price reactions. r
it5 ai1 biRmt1eit (1)
To ensure appropriate pro-active focus on environmental where r
it5stock market return for firm i on day t, aiand bi
issues on local as well as global levels, many firms are creating are the regression parameters for firm i, R
mtis the return on
new, specific positions among board and senior management the market portfolio for day t, and e
t is the residual term.
levels. Some large firms have managers of environmental mar- Excess returns R
itassociated with green marketing
announce-keting, who often serve as members on corporate environmen- ments are measured as shown in Eq.(2): tal task forces, usually as both screeners of relevant external
Rit5rit2(aˆi1bˆiRmt) (2)
factors and internal advocates of environmental sensitivity (Coddington, 1993, p. 3). Unfortunately, some firms that
where Ritis the excess return for firm i on day t, andaˆiand
employ environmental managers mainly do so for compliance
bˆi are parameters estimated from Eq.(1) by using a 100-day
and often do not think in terms of design or process
improve-estimation period starting 110 days prior to the day on which ment. Thus, the null hypothesis:
the green marketing event was announced. The expected value of Ritis zero if the announcement is viewed by investors as
H5: No stock price reactions for announcements related
not conveying material information. to appointments of environmental managers can be
The average excess return ARt for day t is calculated by
contrasted with the alternative of negative stock price
summing Ritover all N firms in the sample and dividing by
reactions.
N. Cumulative average excess returns (CAERs) over a multi-Finally, previous research by Mathur and Mathur (1996)
day interval are obtained by summing the average excess suggests that stock price reactions to marketing strategies are
returns for the multi-day interval. related to a firm’s financial and operational characteristics. In
general, a firm with better financial and operational
character-Tests of Significance
istics will experience more positive reactions than a firm with
Two tests of significance are used in this article. For the time relatively worse financial and operational characteristics.
series standard deviation (TSSD) procedure (see Brown and Three corporate characteristics are identified. It is
hypothe-Warner, 1985), a portfolio of observations is formed and the sized (in alternate form):
variance of ARt for the portfolio is calculated as shown in
H6: That firms with higher growth in earnings will experi- Eq.(3): ence more positive stock price reactions than firms
sAR5(D2 2)21
o
Dt50(ARt2AR) (3)with lower growth in earnings.
where D5estimation length in days for estimatingaˆiandbˆi,
The announcement efforts for a larger firm are diffused over
andARis the average for ARtover the D days. The t statistic
a larger base. Thus:
for day t is shown in Eq.(4):
H7: For larger firms, less pronounced stock price reactions
t 5ARt/sARR (4)
should be observed.
Finally, firms with higher advertising-to-sales ratios may be The t statistic for a multi-day time interval is calculated as shown in Eq.(5):
t5CAERt/(interval length11).5sAR. (5) (Nasdaq) system. Second, their daily stock market returns had
to be available from the NYSE/AMEX/Nasdaq Daily Returns The second test procedure used is the standardized excess
database from the Center for Research on Security Prices return (SER) method (see, e.g., Mathur and Mathur, 1995,
(CRSP) at the University of Chicago. Data on the CRSP equally 1996), which allows adjustment for heteroskedasticity. The
weighted (EW) stock market index were obtained from the standardized excess return SERitis defined as in Eq.(6): CRSP Indices database. Financial data related to growth in
earnings per share (GEPS), sales, and the advertising-to-sales
SERit5Rit/Sit (6)
ratio (ASR) were obtained from the 1996 edition of COMPU-where, as shown in Eq.(7): STAT Plus. Seventy-three announcements related to green
marketing, by firms that met the screening criteria, over the
Sit5
3
V2i3
11(7) time period from January 1, 1989 to December 31, 1995 were identified.
V2
i 5variance of the residual term in firm i’s market
Overall Sample
model OLS,
The cumulative average excess returns (CAERs) for the overall D 5number of days in the estimation period for the
sample for the (210,110), (210, 26), (25,22), (21, 0), market model, and
(11,15), and (16,110) windows are reported in Table 1.
Rm5mean market return. The OLSEW results for the (210,110) window are22.46%.
Based on both the TSSD procedure and the SER procedure, The average of the sum of the standardized excess returns
these CAERs are statistically different from 0 at the 1% signifi-over the multi-day interval T from day t1 to day t2for each
cance level, thus leading to the rejection of null hypothesis firm is computed as in Eq.(8):
H1 of no reaction and the acceptance of the alternative hypoth-esis of negative stock price reactions. The CAERs for the (11,
CSERT5
15) window are20.84% and are significantly different from 0 at the 5% level.
The Z-statistic for testing the significance of CAERs is defined
CAERs were also estimated by using Scholes-Williams betas as shown in Eq.(9):
to adjust for possible estimation bias due to nonsynchronous trading. Table 1 shows that the CAERs for the (210, 110)
Z5CSERT/S(CSERT) (9)
window at23.14% are statistically significant at the 1% level. where, as shown in Eq.(10):
The CAERs for the (11,15) window are also significantly lower than 0 for both the TSSD and the SER procedures. The
S(CSERT)5 T1/2[(D22)/N(D2 4)]1/2. (10)
(16,110) window CAERs are also significantly negative for the TSSD procedure. As suggested by a referee, the sample
Scholes-Williams Betas
was divided into two subsamples by time, one for 1989 toNonsynchronous stock trading introduces bias in the estima- 1991 and the other for 1992 to 1995. The results, available tion of the parameters in Eq.(1). This bias is corrected by from the authors, show that the stock price reactions for computing Scholes-Williams (Scholes and Williams, 1977) 1989–91 were more negative compared to the results for betasbˆ *i for the sample firms: 1992–95.
The results from two slightly different CAER estimation bˆ *i 5 (bˆ2i 1 bˆi1 bˆ1i )/(112rˆm)
procedures, and two different tests to examine whether the obsessed CAERs are significantly different from 0 lead to simi-where bˆ2
i is the OLS estimate from regressing Riton Rmt21,
bˆ1
i is the OLS estimate from regressing Riton Rmt11, andrˆm lar conclusions. Namely, that investors react negatively to
firms’ announcements of green marketing activities. The nega-is the first-order autocorrelation of Rm.
tive reactions are obsessed in days just prior to and just after the announcement. The average firms suffers a decline equal
Data
to 2.46% of its total market value. All remaining tests are Announcements of green marketing activities by firms were
based on the SW estimation procedure and the TSSD testing identified from theWall Street Journal, and from the newswire
procedure. and newspaper files from LEXIS/NEXIS. Event day 0 is the
day that the announcement was published in theWall Street
Subsampling by Marketing Strategy
Journalor was reported by LEXIS/NEXIS. To be included in
the sample, firms had to meet two screening criteria. First, Sixty-three of the announcements were classified into four major categories: product, recycling, promotion, and hiring their stocks had to trade on the New York Stock Exchange
Table 1. Cumulative Average Excess Returns: Overall Sample,n573
CAERs for Event Windows (%)a
Sample
Type (210,110) (210,26) (25,22) (21, 0) (11,15) (16,110)
OLSEWb 22.46 20.51 20.44 20.11 20.84 20.55
TSSDc (22.96)*** (21.26) (21.22) (20.44) (22.07)** (21.37)
SERd (22.93)*** (21.06) (21.41) (20.99) (21.98)** (21.08)
SWe (23.14) 20.51 20.61 20.02 21.16 20.81
TSSDc (23.77)*** (21.26) (21.70) (20.10) (22.87)*** (22.01)**
SERd (23.50)*** (21.18) (21.77) (20.94) (22.34)** (21.46)
aCAERS (cumulative average excess returns) indicate the average market-adjusted change over the event window in the market values of the sample firms. Test statistics are given
in parentheses.
bOLSEW refers to ordinary least squares regression with the CRSP equally weighted index as the market index. cTSSD refers to the time series standard deviation testing procedure. t-statistics are reported.
dSER refers to the standardized excess return testing procedure. Z-statistics are reported.
eSW refers to regressions with Scholes-Williams (1977) beta with the CRSP equally weighted index as the market index.
***, ** Significant at the .01 and .05 levels, respectively.
gies and could not be grouped to provide a large enough stock price reactions to announcements of recycling efforts cannot be rejected.
category for further analysis. Examples of green product
an-nouncements include those announcing environmentally The third subsample of 15 announcements is related to green promotional efforts. The CAERs for the (210, 110), friendly products. Recycling announcements including a new
program for recycling milk and juice cartons from schools, and the (210, 26) windows are significantly negative, thus leading to the rejection of null hypothesis of no stock price and another one about the opening of a new recycling center.
reactions to green promotional activities. The results indicate Examples of green promotion include an announcement of a
that green promotional efforts are not well-received by investors. donation to an environmental group, and announcing
adver-Category 4 deals with announcements of appointments of tising inEarth Daymagazine. The last category includes firms’
corporate environmental policy managers. The CAERs for the announcements of hiring an environmental policy manager.
(210, 110) window are 26.71%, but are not statistically The results for the four subsamples of announcements are
different from zero, primarily due to the small sample size presented in Table 2. The CAERs for the 28 announcements
of 5. Similarly, the CAERs for the other windows are not of green products are generally negative, but in no case
signifi-significantly different from zero. These results do not lead to cantly different from 0. These results suggest that, based on
the rejection of null hypothesis H5 of no stock price reactions the sample size, green product announcements are viewed in
to announcements of appointments of environmental policy a neutral light by investors. The null hypothesis H2 of no
managers. stock price reactions to announcements of green products
cannot be rejected.
Subsampling by Firm Characteristics
The recycling subsample has 15 observations. The results
in Table 2 do not indicate any significant stock price reaction Three measures of a firm’s financial performance are used in this study: growth in earnings per share (GEPS), firm size (SIZE), to recycling announcements. Thus, null hypothesis H3 of no
Table 2. Market Value Effects for Subsampling by Marketing Strategies
CAERs for Event Windows (%)a
Sample
Type (210,110) (210,26) (25,22) (21, 0) (11,15) (16,110)
Product 22.44 20.67 20.38 0.14 21.28 20.24
n528 (21.50) (20.85) (20.54) (0.28) (21.61) (20.31)
Recycling 22.16 0.00 1.10 0.05 21.50 21.82
n515 (21.02) (0.00) (1.19) (0.09) (21.45) (21.76)
Promotion 23.40 21.71 20.31 0.21 21.40 20.18
n515 (22.14)** (22.21)** (20.45) (0.43) (21.80) (20.23)
Manager 26.71 1.21 23.50 20.94 22.37 21.09
n55 (21.58) (0.59) (21.89) (20.72) (21.15) (20.53)
aCAERS (cumulative average excess returns) indicate the average market-adjusted change over the event window in the market values of the sample firms. Test statistics are given
in parentheses.
bThe CAERs are from the SW procedure, and the t-statistics in parentheses are from the TSSD procedure (see Table 1).
Table 3. Wealth Effects for Subsampling by Firm Characteristics
CAERs for Event Windows (%)a,b
Sample Type (210,110) (210,26) (25,22) (21, 0) (11,15) (16,110)
Firms with higher growth in earnings,n531c 22.19 20.61 20.71 20.30 20.51 20.04
(21.69) (20.96) (21.26) (20.76) (20.82) (20.07) Firms with lower growth in earnings,n527c 23.45 21.10 20.02 20.21 21.47 20.63
(22.41)** (21.58) (20.03) (20.48) (22.11)** (20.91)
Larger firms (sales),n530d 22.19 20.14 20.89 20.08 21.17 0.10
(21.57) (20.22) (21.47) (20.19) (21.72) (0.15)
Smaller firms (sales),n533d 23.62 21.03 0.31 0.17 21.70 21.38
(23.02)*** (21.77) (0.61) (0.47) (22.91)*** (22.36)** Firms with higher advertising/sales ratio,n525e 21.83 20.26 20.34 0.08 20.81 20.51
(21.35) (20.39) (20.58) (0.21) (21.22) (20.77) Firms with lower advertising/sales ratio,n524e 24.02 20.49 21.08 20.21 21.45 20.76
(22.39)** (20.61) (21.48) (20.41) (21.77) (20.93)
aSee Footnote a, Table 1. bSee Footnote b, Table 2.
cGrowth in earnings per share (GEPS) was identified for 58 announcements. Firms with higher (lower) GEPS are those with growth rates in earnings per share that are higher
(lower) than the median growth in earnings per share for the 58 obsrvations.
dSales were identified for all 63 announcements. Larger (smaller) firms had sales higher (lower) than the median sales for the 63 observations.
eThe advetising/sales ratio (ASR) was calculated for 49 announcements. Firms with higher (lower) ASR are those whose AST is higher (lower) than the median ASR for the 49
observations.
***, ** Significant at the .01 and .05 levels, respectively.
and the advertising-to-sales ratio (ASR). GEPS is the com- hypothesis H7 of no difference in stock price reactions because the (210,110) window CAERs for the smaller firms are more pounded growth in earnings per share for the three-year
pe-riod immediately prior to an announcement. SIZE is measured negative than the comparative CAERs for the larger firms. Data on ASR were available for 49 of the 63 firms. The as the firm’s sales for the year immediately prior to the
an-nouncement. Similarly, ASR is also measured for the prior year. CAERs for the various windows for firms with higher ASRs are generally negative, but not significantly different from 0. Due to a variety of factors such as issuance of new stocks
and bonds, and changes in accounting methods, and informa- In contrast, CAERs for firms with lower ASRs are negative for all windows, with those for the (210,110) window being tion provided by firms, complete, fully adjusted,
year-by-year financial information on firms may not be compiled and significantly negative. The CAERs for firms with lower ASRs are more negative than the comparable CAERs for firms with reported by COMPUSTAT. Such is the case with the present
green marketing sample also. Lack of some data preclude larger ASRs, thus leading to the rejection of null hypothesis H8 of no differences in stock price reactions due to ASR levels. the possibility of including all firms in the analysis in the
subsection. The results are provided in Table 3.
GEPS could be computed for 58 of the 63 firms. The
Conclusion
median GEPS was identified and the firms were classifiedbased on their GEPS’ being higher or lower than the median The overall results of this study indicate that, in general, corporate news regarding green marketing activities is not GEPS. For the 31 firms with higher GEPS, the CAERs for
none of the windows are statistically different from 0. The well received by investors. The average firm in the sample loses a statistically significant 3.14% of its market value in CAERs for the firms with lower GEPS are negative for all of
the six windows, with the results for the (210, 110) and the 20 days surrounding the announcement date.
Four subsamples of announcements, classified by major (11,15) windows being statistically significant. The CAERs
for the (210, 110) window for the higher GEPS firms are marketing strategies, showed slightly different results. For three subsamples, those related to announcements of green less negative than those for the lower GEPS firms. These results
lead to the rejection of null hypothesis H6 of no difference products, recycling efforts, and appointments of environmen-tal policy managers, the null hypotheses of no significant stock in stock price reactions and acceptance of the alternate
hypoth-esis that firms with higher GEPs will exhibit relatively more price reactions could not be rejected. These results suggest that, in general, announcements related to these three catego-positive stock price reactions.
Sales data were available for all 63 firms. The CAERs for ries of green marketing strategies are viewed neither positively nor negatively by investors. In contrast, announcements re-larger firms for the various windows in general are negative,
but not statistically significant. The CAERs for the smaller firms lated to green promotions produce significantly negative stock price reactions. These results suggest that investors consider for the (210,110), (11,15), and (16,110) windows are
Three measures of a firm’s financial performance—growth new product? Is the green product a response to competitive pressures? Is it in a declining or saturated market? Answers in earnings per share, firm size, and the advertising-to-sales
ratio—were also used in the analysis. The results show that to questions such as these may enrich our understanding of green marketing activities.
stock price reactions are more positive for firms with relatively
higher growth in earnings per share, for relatively larger firms, Similar types of questions can be posed in the recycling area. It is possible that stock price reactions to recycling of and for firms with relatively higher advertising-to-sales ratios.
These results have important managerial implications. products designed specifically for recycling may be different from those where the recycling efforts were an afterthought. It may also be relevant to examine the recycling mechanism
Managerial Implications
as it relates to channels of distribution.Green advertising literature has examined different facets The results of this study indicate that, in general, investors
of green advertising, and pointed to a variety of influencing have reservations about corporate green marketing activities.
factors. It is possible that the results of this study may be However, investors seem to feel more comfortable with green
affected by factors such as the specific environmental claims marketing activities by firms that have relatively better
finan-made, advertising media, and ad depth and focus. Future cial performance, as measured by growth in earnings per share,
research, by focusing on these types of factors, may provide by firm size, and by the advertising-to-sales ratio. Firms with
additional managerial guidelines for marketing strategies in relatively better financial performance may enjoy credibility
an area that is clearly going to be of interest to managers, with investors. Thus, their green marketing activities may be
workers, consumers, regulators, and investors for some time viewed more positively. On the other hand, it is possible
to come. that green marketing activities by firms with relatively weaker
financial performance may be viewed by investors as
opportu-The authors thank three anonymous referees and JBR Special Issue Editors
nistic, thus resulting in more negative stock price reactions.
James Verbrugge and George M. Zinkhan for their helpful comments on
As has been noted previously in literature, the results
sug-earlier drafts of this article, and Patty Doolin for her assistance with the
gest that green marketing activities should have as their genesis preparation of the manuscript. This research was supported by a College of a corporate orientation to green issues. Firms whose opera- Business Scholars Program Research Grant to Lynette Knowles Mathur.
tions are designed with environmentally sensitive issues in mind may find that their green marketing strategies are
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