Managing noise in signalling effectiveness: an empirical test of listed companies in China
ISSN: 1746-5265
Article publication date: 30 November 2018
Issue publication date: 18 March 2019
Abstract
Purpose
Signalling theory suggests how “strong” or “weak” the signal quality detected by a receiver (defined as signalling strength) is distorted by noisy factors (defined as noise). Although corporate cooperation signals are known to lead to receiver reaction, the effects of distortion factors on signal credibility are generally unexplored in signalling process. The paper aims to discuss this issue.
Design/methodology/approach
After analysing 264 contract announcements in 2013–2015 that befall publicly listed firms in China, the authors explore the signalling impact of contract value. the authors also incorporate the signalling noises, namely, signalling environment, external referents and other signallers, into the contracting context and investigate their effects on distorting the relationship between signal strength and receiver reaction.
Findings
Results indicate that firms’ contract-signing announcement conveys an effective signal to investors: the larger the contract scale is, the more investor reaction the firms experience. The signalling effects of contract scale on investor reaction are moderated by the three distorting factors.
Originality/value
The findings contribute to the signalling theory literature on the effects of signalling noise on receivers’ perception of signal observability.
Keywords
Citation
Yao, N.(C)., Zhu, W. and Wei, J. (2019), "Managing noise in signalling effectiveness: an empirical test of listed companies in China", Baltic Journal of Management, Vol. 14 No. 2, pp. 235-249. https://doi.org/10.1108/BJM-12-2017-0389
Publisher
:Emerald Publishing Limited
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