Abstract
A small number of sell-side analysts use the Freedom of Information Act to request records from the Food and Drug Administration (FDA) on covered stocks. These records are non-public to the extent that firms are not required to share them with investors or analysts. Using a difference-in-differences methodology, we find that buy recommendations and upgrades earn higher stock returns over the year following the receipt of FDA records. We also find that receipt of FDA records improves earnings and revenue accuracy for two-year ahead forecasts. We control for analyst skill and for the same information set across all analysts. Our findings are consistent with a subset of analysts utilizing non-public information channels to gain value-relevant information about their covered firms.
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