The role of marketing in the valuation of a firm: exploring the underlying mechanism

Marketing plays a significant role in the value of a company, and thus has an impact on the value of the common stock. Yet, the significance of marketing in determining the value of a company and its common stock is not clearly recognized in finance. While financial theory relies heavily on estimates of future revenue streams to predict the firm's ability to cover operational costs and generate profits for shareholders, financial theory usually takes marketing as a 'given' in financial analysis. The ability of marketing to generate various revenue streams for the firm (depending on strategic objectives) is often over-simplified. This paper examines the role and significance of marketing in determining the value of the firm, and the price of its common stock.