Analysis of the Impact of Greenwashing on Stock Financial Performances of Companies

As organizations face pressure from consumers to address ESG issues, sustainable marketing campaigns have become prevalent. Such campaigns can link a brand's public image to environmental sustainability, thereby helping to boost sales. Many companies will be attracted to the huge benefits of an ESG product like green bond. But there are some companies that just love the mere boo-boo of ESG. They want to label their company as ESG as a way to attract users with advertisements. As a matter of fact, they will not do any actions related to green bond. This behaviour is known as greenwashing. The aim of this paper is to explore the impact of greenwashing on companies, especially when the public notices. For research, this paper uses an event study to help quantify unusual changes in stock prices when a particular event occurs, such as when a company is exposed for greenwashing practices. The object of study is the bond price of S&P 500 and Volkswagen from June 8th, 2014 to April 9th 2015. Data sources are from Investing.com, which widely used by investors, analysts, researchers and financial practitioners worldwide. Finally, this study finds that the abnormal returns (AR) show significant fluctuations during the event window, especially around the event date, August 21, 2015, this demonstrates the adverse effect that greenwashing has on a company.