Economics at your fingertips  

How rumors fly

Ming Jia, Hongfei Ruan and Zhe Zhang

Journal of Business Research, 2017, vol. 72, issue C, 33-45

Abstract: News media do not always report objectively. In particular, negative rumors encourage news media to hype unconfirmed reports and lead to media bias. In this study, we seek to understand how negative rumors spur corporate clarifications. We find that after rumors surface, news coverage of those rumors by credible sources increases the magnitude of subsequent media bias on target firms. Moreover, we find that the power of a negative rumor depends on the extent to which the public believes the rumor. We focus on how community religious norms affect the public's interpretation of rumors and propose that religious norms among the population surrounding a target firm increase the magnitude of negative media bias on that firm. To counter media bias, we find that firms—especially those with reputations for corporate philanthropy—make technical clarification announcements that provide substantial details. Based on samples of negative rumors in the Chinese stock market from 2006 to 2012, empirical studies provide strong support for our arguments.

Keywords: Rumors; Media bias; Religious norms; Corporate clarification; Corporate philanthropy (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

Journal of Business Research is currently edited by A. G. Woodside

More articles in Journal of Business Research from Elsevier
Series data maintained by Dana Niculescu ().

Page updated 2017-09-29
Handle: RePEc:eee:jbrese:v:72:y:2017:i:c:p:33-45