Signaling theory and risk perception: An experimental study

Haim Levy*, Esther Lazarovich-Porat

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

26 Scopus citations

Abstract

Theoretical models provide unsatisfactory solutions to many issues in finance and economics. For some important issues, signaling theory bridges the gap between the theoretical solutions and the firm's actual behavior. However, many of the signaling theories are difficult, if not impossible, to test empirically. In this paper, we provide experimental tests of one of the signaling theories. We test the hypothesis that the larger the proportion of entrepreneur participation in a project, the higher is its stock price, as determined in an auction. The results strongly support the hypothesis.

Original languageEnglish
Pages (from-to)39-56
Number of pages18
JournalJournal of Economics and Business
Volume47
Issue number1
DOIs
StatePublished - Feb 1995

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