This paper examines the relationship between corporate governance and equity prices. It uses a "Governance Index" based on 24 corporate governance provisions to analyze the relationship between corporate governance and stock returns, firm value, and corporate performance. The study finds a strong relationship between corporate governance and stock returns, with firms with stronger shareholder rights outperforming those with weaker rights. The Governance Index is also highly correlated with firm value, with a one-point increase in the index associated with a significant decrease in Tobin's Q. The study also finds that weaker shareholder rights are associated with lower profits, lower sales growth, higher capital expenditures, and more corporate acquisitions. The paper discusses several causal interpretations of these findings and their implications for corporate governance policy. The data used in the study is drawn from the Investor Responsibility Research Center (IRRC), which tracks corporate governance provisions for about 1,500 firms per year. The study also incorporates information about state takeover laws. The Governance Index is constructed by adding one point for each provision that reduces shareholder rights. The study finds that firms with the highest governance index (weakest shareholder rights) underperformed firms with the lowest governance index (strongest shareholder rights). The results suggest that corporate governance has a significant impact on firm performance and stock returns. The paper concludes that corporate governance is an important factor in determining firm value and performance, and that policymakers should consider the implications of corporate governance for market efficiency and investor protection.This paper examines the relationship between corporate governance and equity prices. It uses a "Governance Index" based on 24 corporate governance provisions to analyze the relationship between corporate governance and stock returns, firm value, and corporate performance. The study finds a strong relationship between corporate governance and stock returns, with firms with stronger shareholder rights outperforming those with weaker rights. The Governance Index is also highly correlated with firm value, with a one-point increase in the index associated with a significant decrease in Tobin's Q. The study also finds that weaker shareholder rights are associated with lower profits, lower sales growth, higher capital expenditures, and more corporate acquisitions. The paper discusses several causal interpretations of these findings and their implications for corporate governance policy. The data used in the study is drawn from the Investor Responsibility Research Center (IRRC), which tracks corporate governance provisions for about 1,500 firms per year. The study also incorporates information about state takeover laws. The Governance Index is constructed by adding one point for each provision that reduces shareholder rights. The study finds that firms with the highest governance index (weakest shareholder rights) underperformed firms with the lowest governance index (strongest shareholder rights). The results suggest that corporate governance has a significant impact on firm performance and stock returns. The paper concludes that corporate governance is an important factor in determining firm value and performance, and that policymakers should consider the implications of corporate governance for market efficiency and investor protection.