Investigating the effect of social media fake news on consumer behavior: an empirical study with multiple moderations

The severity and prevalence of fake news on social media (SM) are growing, which leave detrimental effects to businesses. Therefore, understanding consumer behavior when they are exposed to SM fake news is important. From the perspective of information asymmetry and signaling theory, this study derives that the negative effect of fake news on consumer trust is further reinforced in the presence of information asymmetry. Conversely, vendors’ signal credibility and consumers’ perceived vendor reputation diminish the effect of SM fake news on consumer trust. Our research model is empirically validated via an online survey. The results support these three moderation effects. In addition, the results indicate that consumers’ brand bias is a direct predictor of consumer purchase behavior. The findings suggest development of strategies for marketing managers and executives to mitigate the impact of SM fake news by signaling techniques. Further implications for research and practice along with future research opportunities are offered.