Showing papers on "Signalling theory published in 1983"
TL;DR: In this paper, the authors seek to ascertain if stock market pricing procedures are operationally efficient in setting prices so as to discriminate against poor-quality management by using Ordinary least-squares regression analysis.
Abstract: This paper seeks to ascertain if stock market pricing procedures are operationally efficient in setting prices so as to discriminate against poor-quality management. Signalling theory suggests management's leverage decision as the means by which managerial quality can be identified. Departures from average leverage, given firm characteristics, are interpreted as indicating managerial quality. Ordinary least-squares regression analysis is used to identify these departures, and to test if shareholders' yields are responsive to them. The results are not always statistically significant, but do provide some support for the signalling hypothesis and for the efficiency of UK security pricing.