The information content of private information acquisition: evidence from FOIA requests to the SEC

This study examines whether Freedom of Information Act (FOIA) requests to the Securities and Exchange Commission convey value-relevant information about publicly traded firms and whether sophisticated investors trade on that information. Our empirical analysis reveals heterogeneous value relevance associated with different types of requests. Specifically, requests submitted by proxy agents to probe for ongoing investigations as well as anonymous requests are negatively correlated with future returns, while requests from institutional investors and intellectual property entities are associated with positive future returns. Our results also support the direct-trading hypothesis, showing institutional investors and short sellers trade on FOIA-obtained information. Our findings add to the information-acquisition literature by highlighting the heterogeneous value signals in FOIA requests, particularly the negative value signals.