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This research note describes how the corporate governance attributes of publicly listed companies are received by financial markets. At the heart of our study is the relation between firms’ corporate governance ratings and their cost of equity capital. We present empirical evidence to quantify the effects of investors’ concerns for corporate governance on expected returns in today’s financial landscape. Using a panel of US firms with diverse corporate governance ratings over the period 2003-2005, we investigate whether differences in corporate governance translate into differences in expected equity returns, hence, into variation in the cost of equity. Our study uses governance ratings provided by Governance Metrics International (GMI) to assess the association between the quality of corporate governance and the cost of equity capital of public firms. While prior empirical research revolves around the association between corporate responsibility measures and a firm’s market value, only few studies isolate the cost of equity component that is critical to portraying equity markets’ attention to risks associated with poor corporate governance. We use the ex ante cost of capital implied in contemporaneous stock price and analyst forecast data for this purpose. To our knowledge, Ashbaugh-Skaife et al.(2006) is the only academic study directly related to this research note. Their evidence suggests that several corporate governance constructs are associated with a lower cost of equity, consistent with the idea that better governance reduces the agency and information risks against which investors price protect. We follow and extend their approach using GMI …