The Centre for Business Economics is pleased to invite you to a seminar with Colleen Flaherty Manchester, University of Minnesota Carlson School of Management.
Prior research shows that referrals are advantageous in hiring and potentially also for admission into degree programs. Using a signaling framework to inform our analysis and interpretations, we provide new empirical evidence that having a referral conveys information on unobservable candidate quality. Findings from admissions data from a Master’s in Business Administration (MBA) program in the U.S. align with implications of the information-based signaling framework. Further, more direct evidence of referrals providing a favorable view of hard to observe candidate qualities is obtained by leveraging the implementation of a standardized test waiver. We also find that the referral signal is more effective for candidates from historically excluded backgrounds as compared to White candidates, which we conclude stems from a greater benefit from signaling.