Despite years of study, the impact of firm-level governance on stock returns is not clear, especially in non-U.S. markets. We investigate the returns of governance-based trading strategies in Asia, using bias-free return data and CLSA governance ratings. We argue that poor governance should be associated with higher market risk. We find that a portfolio of poorly governed firms has a higher market beta, higher expected return and higher realized return, compared with a good governance portfolio. In contrast to some earlier studies, we find no abnormal returns after adjusting for risk and country effects. Only investors who can predict in advance which firms will improve their governance can earn abnormal returns.