Does buying green pay off? Stock market reactions to green acquisitions

As sustainability trends gain momentum, more businesses seek to expand their green business portfolios by acquiring firms with green technologies or green brands. However, the financial impact of this green marketing strategy is unclear. Utilizing event study methodology and the two-stage Heckman selection model, this study investigates stock market valuations of 182 announcements about green acquisitions from US public firms between 2000 and 2018. We report several interesting findings. First, we find that green acquisitions are accompanied by positive stock market reactions. Second, the stock market reacts more favorably to acquirers with a higher level of marketing capability and a lower level of innovation capability when green acquisitions are announced. Third, industry sensitivity moderates the effects of the two aforementioned organizational capabilities on the stock market return−green acquisition relationship. We gain insight into investor responses in the context of green acquisitions through the lens of marketing and innovation capabilities. The findings enrich research in the domain of marketing−finance interface and sustainability marketing by shedding light on the short-term green acquisition–firm value relationship.