The greening of corporate names: Another way of greenwashing

Companies are looking for ways to change their public image as concerns about climate change and sustainability grow. A study by Carmelo Latino of the Leibniz Institute for Financial Research SAFE sheds light on the financial impact of corporate name changes. His study is based on a textual analysis of the business description sections of Form 10-K, the standard annual report filed by companies with the U.S. Securities and Exchange Commission (SEC) after the name change. It demonstrates that many of these name changes can be interpreted as a novel form of greenwashing, wherein companies strategically alter their image to project eco-friendly and sustainable impressions.

SAFE researcher Latino analyzes whether the adoption of green names influences investor behavior. His findings reveal a significant positive stock market price reaction to the announcement of corporate name changes to green-related names, particularly if the respective company was not involved in green activities at the time of the announcement. “Companies that add ‘green’ words to their names experience significant cumulative abnormal returns of about 15 percent during the one-day period following the announcement.”

Source: The greening of corporate names: Another way of greenwashing