The job market is characterised by information asymmetry. Prior to commencing a job, and
directly experiencing work conditions first hand, a potential employee cannot fully assess the quality of a prospective employer with certainty. The same is true from the employer’s perspective (Spence 1974). Given the importance of employment contracts, and their long term implications for both the employee and the employer, both parties are motivated to identify ways to reduce this information asymmetry and lessen the problem of adverse selection. From the potential employees’ perspective, asymmetric information arises from the unobserved characteristics of the prospective employer, e.g. work climate and career development, etc (Schmidtke 2002). Given the risk to both parties, it is in the best interest of a potential employee to find out as much as they can about a prospective employer, and for a prospective employer to signal to the employment market, their competencies and characteristics (Spence 1974, p. 1). Characteristics inherent in the firm’s brand influence potential employees’ understanding of the firm as a prospective employer. If the potential employee has insufficient, inconsistent or incorrect beliefs about a prospective employer,
potential employees may perceive high risks associated with joining the organisation and,consequently remove them from their consideration set of prospective employers; selecting an alternative employer for which they perceive less risk.