“CBCV: Reshaping the Practice of Corporate Valuation Using a Customer-Driven Approach” by Daniel M. McCarthy (Emory University).
Marketing academics have spent considerable energy trying to convince a key set of stakeholders of their ability to value marketing assets – investors and financial analysts. “Customer-based corporate valuation” (CBCV), which explicitly links customer behavior to future cash flows, has emerged as a promising methodology. In this paper, I assess and enhance the real-world utility of CBCV in five ways. First, I estimate the models upon a richer collection of customer-related disclosures, allowing me to incorporate cross-cohort dynamics, duration dependence, and unobserved heterogeneity. Second, I apply these models to all previously unpublished public company analyses I have ever publicly disclosed. These seven companies operate across a wide variety of industries, supporting CBCV’s robustness and portability. Third, I show that trading rules utilizing the proposed valuation estimates would have generated excess market returns, in addition to better performance along traditional fit measures. Fourth, I enhance the accessibility of the models through a simple Excel-based tool. Finally, I provide evidence of the impact of these analyses on stock prices, media, equity analyst reports, securities law, and regulatory bodies.