A stereophonic broadcasting system incorporating companding of the difference signal in which both the usual difference signal(s) and a compressed version of te difference signal(s') are transmitted to one or more remote receivers (70). At the receiver (70) the usual difference signal(s) and the compressed difference signal(s') are combined (84) and the resulting signal then expanded (86) to obtain a noise-reduced difference signal for dematrixing (74) with the sum signal (M) to obtain the original left (L) and right (R) signals. Utilizing both difference signals increases the effective level of the received difference signal by about 6dB, whereas the noise is increased only about 3dB, for a net improvement of about 3dB in signal-to-noise ratio, and also permits compression of the difference signal according to any desired compression law and the use of the unchanged difference signal(s) as a reference signal for controlling the expansion (146) of the compressed difference signal(s') so as to cause the amplitude of the companded difference signal to equal the level of the usual difference signal(s). That is, the expander is adaptive to any compression characteristic that might be employed at the transmitter (24). Further the availability of the usual uncompressed difference signal(s) at the receiver enables the adaptive decoding of dynamic parameters of the received signal, such as frequency response and attack and recovery times, so that all of the parameters of the original signal can be restored automatically.