Decentralized finance (DeFi) has emerged to offer traditional financial services such as lending, borrowing, and trading without intermediaries (e.g., banks). DeFi transactions are typically executed using a special digital class of contracts called smart contracts. These contracts are self-executing and hard-coded directly on a blockchain. We observe the emergence of a new class of voluntary audits that evaluate the integrity of these contracts. Using a hand-coded sample of about 8,500 smart contract audit reports, we provide some of the first evidence showing that (1) these audits are pervasive, (2) the audit firm market is composed of new technical audit firms, (3) the scope of these audits can span a variety of contract features, (4) the audit inputs and outputs differ substantively from those of conventional financial audits, and (5) the market reacts positively to the release of these audit reports, suggesting that these reports are value-relevant. These findings highlight the demand for novel assurance services driven by blockchain technology.

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.