Public companies that seek to make assets more sustainable are generally rewarded on the stock market. In particular, the acquisition of “green” companies is generally well received by shareholders, according to a study by Concordia University.
“We wanted to show the link between a company’s environmental efforts and its financial performance. More specifically, we looked at how shareholders perceive the acquisition of green companies,” explains study co-author Yuyan Wei, professor of marketing at the John Molson School of Business. Concordia University.
Published last October in the international journal Industrial Marketing Manage, the study in question entitled “Does buying green pay off?” » (or in French: “Does it pay to buy green?”) explores the relationship between the acquisition of companies considered “green” and the performance of the purchasing company’s stock on the stock market.
Result: companies that buy companies of this type generally see their share price appreciate at the time of the acquisition.
To achieve this observation, Mme Wei and fellow researcher Devashish Pujari studied stock market reactions to nearly 200 green company acquisition announcements by public companies in the United States between 2000 and 2018.
The researchers established a three-day window to observe shareholder reaction, namely the day before the announcement, the day of the announcement and the day after. Among the examples studied: the purchase of Bare Foods by PepsiCo in 2018, or those of Organic&Raw by Coca-Cola and Ethical Bean Coffee by Kraft Heinz, the same year.
Nuances depending on the industry
If the study notes a positive stock market trend linked to the acquisition of green companies, it also brings some nuances. For example, researchers show that the extent of shareholder enthusiasm depends partly on the marketing capabilities of the company, but also on the type of industry it is.
“If companies have the means to effectively communicate their steps to become more responsible, there is a better chance that it will be well received,” explains M.me Wei. “They are also better able to know what will be perceived positively by the general public,” she adds.
However, there are limits. Shareholder enthusiasm is less when it comes to a company with great marketing capabilities but which works in a polluting industry and which is therefore scrutinized by authorities and environmental organizations, note the researchers.
In these cases, shareholders may then interpret this type of initiative as being “opportunistic and less reliable,” the study noted. “This may be partly because people are becoming more aware of the risks associated with greenwashing. They are therefore also more skeptical,” says Mme Wei.