Insufficient social media oversight fosters challenges in verifying information, fueling the swift spread of damaging rumors that trigger adverse investment responses for targeted companies. This study assesses three counter-rumor strategies, differing in deniability (high, moderate, low) and enacted by varying sources (internal, external), to prevent adverse investment reactions post negative rumors. In a 2 × 3 experiment (source × rumor response), higher strategy deniability corresponds with increased nonprofessional investors’ willingness to invest in targeted companies. Results find that when internal agents such as CEOs are sources, only high deniability strategies foster increased investment willingness. Mediation analysis reveals investor perception of counter-rumor persuasiveness and rumor intensity underpin these dynamics. These findings guide companies’ social media policies for effectively countering negative rumors and provide regulatory insights into influencer marketing for nonendorsed activities.

JEL Classifications: D81; M41.

Keywords:
investor judgments, rumors, signaling theory, social media, source credibility theory
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2025