In the contemporary financial marketplace, the consequences of speculation and decision making based on unfounded assertions and false rumors can be especially potent and undeniably dangerous. With the emergence of the Internet and other new communication technologies that facilitate the spread of misinformation, it has become essential for managers, investors, and other stakeholders to acquire a better understanding of the forces that give rise to rumors and the most effective strategies for dealing with them. This paper describes how the uncertainties and anxieties generated by ambiguous situations, coupled with a strong desire for information, can frequently lead to the generation and spreading of rumors in business environments. Although relatively little research attention has been paid to the particularities of financial rumors, the author identifies some key characteristics that appear to distinguish financial rumors from rumors about other aspects of business operations, such as greater conciseness, a shorter life cycle, and the potential for significant economic consequences. The paper concludes with a set of recommendations for future research and for actions that can be taken to minimize the potentially harmful effects of financial rumors.
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