This paper evaluates the hypothesis that, in setting wages, firms respond to costly signals by workers when such costs are informative of their values to the firms. For workers who become mothers, uncertainty about their future values can influence firms' decisions to distribute career and promotion opportunities. Consequently, workers may forgo paid parental leave even when there is no human capital depreciation associated with taking leave. I build a signaling model with a continuous choice of leave period when such choice is restricted due to the maximum allowed paid leave duration. Using administrative data from Denmark and a parental leave policy extending the maximum allowed duration of parental leave, I show how a leave extension affects wages, hours, and promotion opportunities for workers whose signaling ability changes with the extension. In contrast to human capital theory, an individual can take longer leave but gain in wages when the larger choice set allows more workers to signal their type. The paper provides evidence of the labor market consequences of parental leave-taking due to signaling and the importance of asymmetric information in shaping parental leave choice.