Showing papers on "Signalling theory published in 2015"

Theoretical Perspectives on Corporate Social Responsibility Disclosure: A Critical Review

Abstract: This study provides an extensive critical review of the theoretical perspectives applied on corporate social responsibility (CSR) disclosure literature. From a CSR standpoint we review and discuss, in detail, legitimacy theory, stakeholder theory, social contract theory, and signalling theory to identify the situations that suit each of these perspectives. The findings show that there is no universal theory applicable on corporate social responsibility disclosure for all situations or societies. While legitimacy theory suggests CSR disclosures are part of a process of legitimation, stakeholder theory offers an explanation of CSR accountability to stakeholders. Legitimacy theory seems to be more suitable for organizations working in developed countries, on the other hand, stakeholder theory appears to be most suitable for organizations working in developing countries; where a corporation can manage its stakeholders and the pressure to comply with existing legislation is less as compared to the developed countries. Social contract theory is appropriate for developed/emerged economies, as CSR disclosure exists due to an implicit social contract between business and society, which implies some indirect obligations of business towards society. Signalling theory will suit a situation where firms are competing for resources. A firm willing to demarcate from other firms will engage in more CSR practices. It is also important that the signal reaches the target audience by reporting on CSR.

Corporate governance, performance and employee disclosure in cooperatives: an empirical test of legitimacy and signalling theories

Abstract: The financial services industry has undergone various changes due to technological changes and deregulation. Cooperatives have responded to the changing competitive environment through expansion in operations and product diversification. As cooperatives become larger and more sophisticated, there has been a gradual shift from using volunteers for day-to-day operations to salaried employees. This study tests legitimacy and signalling theories by investigating the drivers of employee-related disclosures in savings and credit cooperatives (SACCOs) in Kenya. Employee-related information is obtained from audited annual reports of 212 SACCOs over the period 2008 to 2013. Ordinary least squares panel regression is used to analyse the drivers of employee disclosures. The results indicate that employee disclosures are driven by legitimacy and signalling factors. More specifically, the results reveal that employee disclosures are positively associated with corporate governance and asset quality. The results also reveal a negative association between return on assets and employee disclosures. This study adds onto the sparse literature on employee disclosures in cooperatives, which contribute greatly towards member welfare and economic development.

Firm Resources, Corporate Governance and the Disclosure of Intangible Assets

Abstract: The paper investigates the determinants of intangible asset disclosure with reference to the interaction of heterogeneous asset and governance characteristics of firms. Specifically, it considers R&D intensity as a measure of asset heterogeneity and multiple proxies for the effectiveness of the firm’s corporate governance mechanisms and structures of accountability. Intellectual capital attributes are applied as the measure of disclosure quality and as the signalling mechanism through which management are able to inform markets of their competitive advantage. By applying the resource based view of the firm and signalling theory, the paper extends prior research on the determinants of intangibles disclosure through an analytical framework that examines the interaction of firm resources, corporate governance and intangibles disclosure. The theoretical framework combines the RBV of the firm in confirming intangibles as a necessary feature of disclosing firms’ asset base and signalling as the means with which management disclose their competitive advantage. The results of the analysis indicate a positive relationship between R&D intensity, complexity and scope of activity and the presence of quality signalling responses. Also, the separation of the roles of chair and non-executive director, complemented by experienced non-executive directors promote quality signalling through the disclosure of intellectual capital attributes. These findings support the view that corporate governance mechanisms are only effective when applied in combination. Governance mechanisms bring about transparency and accountability through disclosure of these intangibles despite the potential competitive losses. The lack of proprietary costs that might otherwise restrict disclosure might be attributed to competitors’ inability to imitate such intellectual capital resources and therefore their inability to duplicate such signals. The findings confirm the interaction between heterogeneous assets and governance mechanisms in the disclosure of intangibles as signalling mechanisms for management.

Quality Certifications as Hotel Selection Criteria

Abstract: Signalling Theory proposes that consumers use quality cues to reduce the risk of adverse selection derived from the presence of information asymmetries in favour of services providers. From this perspective, the present chapter analyses the value of quality certifications as marketing signals in accommodation selection. To this end, factors influencing the use of signals by customers are reviewed in order to propose a model which explains the reasons for the selection of a certified hotel. We focus on first-time guests, as evidence suggests that previous experience with a particular service provider works as an important risk reliever. A survey of 385 Spanish leisure guests evidences the existence of situational and personal factors determining the importance of quality certifications as hotel selection criteria. Use of heuristics depends on customer information search behaviour. In that sense, travel involvement and a pre-trip planning period influence the probability of selecting a certified hotel. On the other hand, there seems to be a relationship between this probability and the level of familiarity with the service. Managerial implications and future lines of research are also discussed.