Signalling theory

About: Signalling theory is a research topic. Over the lifetime, 63 publications have been published within this topic receiving 2366 citations. The topic is also known as: Vilmo.

When does environmental corporate social responsibility promote managerial ties in China? The moderating role of industrial power and market hierarchy

Abstract: Although stakeholder theory suggests that ECSR improve firm performance by signal a positive evaluation, this research finds that these signalling effects vary with industrial power and market hier...

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.

The death of costly signalling

Abstract: How do organisms communicate honestly despite conflicts of interest? Over the past quarter-century, the "costly signalling" hypothesis -- that signal honesty can be ensured by appropriate signal cost -- has emerged as the dominant explanation for this puzzle. First proposed by Zahavi [1, 2] and formalized by Grafen [3] and Godfray [4], this hypothesis has led to a proliferation of theoretical models [5, 6, 7, 8, 9, 10, 11, 12, 13, 14] and empirical tests (reviewed in [15, 16, 17, 18]). Unfortunately, these empirical studies suggest that honest signalling is not always accompanied by the predicted signal costs (reviewed in [12]), and some signalling systems (including human language) appear not to require signal cost at all. In response to these difficulties, researchers have attempted to identify special mechanisms by which signalling can be honest even with low or zero signal cost (also reviewed in [12]). Here, we show that no special mechanism is necessary. While the cost of out-of-equilibrium signals plays an important role in stabilizing honest signalling, the signals actually employed at equilibrium need not be costly. Therefore, even unrelated individuals with conflicting interests can communicate honestly using cost-free or very cheap signals; contrary to the "handicap principle," waste is not required to ensure honest signals. We illustrate this by constructing examples of cost-free signalling equilibria for the two paradigmatic signalling games of Grafen [3] and Godfray [4]. Our findings (1) significantly revise previous theoretical conclusions regarding the requirement for signal cost in honest signalling systems, (2) explain the discrepancy between empirical signalling studies and theoretical predictions, (3) suggest why some animal signals use cost to ensure honesty while others do not, and (4) provide ways in which signalling theory can be used to address the "problem of deception" in the evolution of human language.

The Application of Human Capital Theory and Educational Signalling Theory to Explain Parental Influences on the Chinese Population’s Social Mobility Opportunities

Abstract: Existing studies argue life chances are, in part, vertically reproduced. Such a statement is applicable to the Chinese contexts as, but not limited to, parental hukou status, to some extent, determines the life chances their children receive. In this essay, the author would like to introduce human capital theory (HCT) and educational signalling theory (EST), and assess how the applications of each of these two models can enrich the understanding of vertical reproduction of individuals’ social mobility opportunities. The author would also present the limitations of each of these two models when addressing relevant Chinese contexts.