The way people evaluate businesses has long depended on a shared sense of what is true. But a new collection of studies published in Business and Society suggests that fake news is quietly corroding that foundation, making it harder for consumers, investors, and workers to make sound judgements about the organisations they engage with every day.
Researchers from Baruch College, IULM University, Rutgers University, and Marquette University assembled a special issue examining how misinformation affects the social evaluations that underpin corporate reputation, legitimacy, and public trust in business. Their central finding is troubling: even when people know that a piece of fake news is false, it continues to shape how they think and act.
The research highlights that businesses have historically relied on trusted intermediaries, including journalists, financial analysts, and regulatory bodies, to help the public form accurate impressions of their conduct. Social media has dismantled much of that infrastructure. In its place, unverified content spreads rapidly, produced by sources that face little accountability and have no reputational stake in telling the truth.
Emotionality emerged as a decisive factor in how fake news spreads. One study found that fake news about corporate governance topics, when framed in vivid, episodic narratives rather than abstract themes, achieved significantly higher visibility online. Another study focused on the Irish Health Service Executive’s response to an anti-vaccination campaign, and found that tackling misinformation required emotional counter-messaging rather than simply presenting facts.
The studies also found that a good corporate reputation offers less protection than previously assumed. In fact, companies with strong positive reputations may be more vulnerable to reputational damage from fake news, not less, because any allegation appears more surprising and therefore more newsworthy to audiences expecting better. This challenges decades of thinking about reputation management, in which goodwill was seen as a buffer against crises.
Perhaps most unsettling is the persistence of fake news after it has been debunked. Researchers introduced the concept of illusory conduct stigma to describe the social penalty that lingers even when a false narrative has been corrected. Stakeholders may consciously acknowledge that the story was wrong and still behave as though some residue of wrongdoing remains, affecting their purchasing decisions, investment choices, and willingness to work for or partner with a firm.
The research also found that individuals tend to believe others are more susceptible to misinformation than they themselves are. This belief, in turn, influences their own first-order judgements through social adaptation, creating a paradox in which no one thinks they are fooled but everyone ends up affected.
The researchers call for substantially more research into which types of companies and which stakeholder groups are most at risk, and what broader societal mechanisms might help restore confidence in the information environment that underpins public accountability in business.