Do investor perceptions of corporate governance initiatives affect firm value: The case of TIAA-CREF

We examine the valuation effect of the announcement of TIAA-CREF's Corporate Governance Policy, an exogenous event fitting McConnell's [McConnell, J. J. (2003). Outside directors. Financial Review, 38, 25–31] description of a “controlled experiment”. This event avoids the negative connotation associated with announcements concerning specific firms. Abnormal returns are positively related to the number of large block holders and the number of institutional owners, indicating that the values of firms with weak governance structures declined or the values of firms with desirable governance structures increased. Also, the percentage of institutional ownership and the number of institutional owners have a low correlation, indicating that they are different dimensions of institutional ownership.