Investor-Driven Governance Standards and Firm Value

We examine whether there are baseline corporate governance practices effective in generating value across firms. Using a novel measure of corporate governance based on the stated preferences of a large group of institutional investors, we find that firms that adhere more closely to these stated preferences have higher valuations. Our empirical measure of these preferences is also associated with more stringent monitoring. Taken together, our results suggest that such baseline governance practices have a positive impact on firm value via more effective board oversight.