1. (Nasha Anantchotikul, Roy Kouwenberg, Visit Phunnarungsi)
Discussion of Do Firms Decouple Corporate Governance Policy and Practice?
(Nasha Anantchotikul, Roy Kouwenberg, Visit Phunnarungsi)

2. Overview Motivation Summary of findings Some suggestions
Enjoyed reading the paper!

3. Motivation Sometimes governance only looks good on paper
Credible premise
Law and finance literature provides evidence on the importance of rule of law in addition to legal protections of shareholders in countries with weak legal regimes
US evidence links weak governance to accounting restatements and fraud in the US

4. This paper
This paper takes it to the firm (micro) level and asks whether firms with sound governance rules in place violate listing requirements and laws
The authors also distinguish firms that have sound governance from firms that use ‘cheap talk’
The empirics bring forth new Thai company-level data on governance

5. Some questions/suggestions
Average number / presence of violations
Does the SET data contain information about the gravity of the violation
Accounting fraud: tests currently look at rules and procedures regarding financial statements and qualified/adverse auditor opinion
The reputation of the auditing firm used could be of significance. Firms that pick a less reputed auditor may be ‘talk only’ about their stance on governance quality.

6. Some questions/suggestions
Insider trading?
Do we have data on the extent of insider trading
Likelihood of being sued?
Do we know if a shareholder suit followed SET’s disclosure of violations (those could be thought of as the graver instances of governance failure)
Could symbolic governance rules be implemented on paper may to provide some protection from a shareholder lawsuit

7. Some questions/suggestions
Does CEO ownership interact with the observed patterns – individual managerial self-interest could partly compensate for governance failures
It would seem that implementation of governance rules would also be affected by whether the firm is closely held (e.g. has a large controlling owner/family owner)
In an extension, it may be interesting to model the cheap talk behavior of firms that only attach symbolic meaning to governance standards

8. Conclusions Enjoyed reading the paper!
Interesting new evidence from Thailand
Governance policies contribute to fewer subsequent violation of listing rules and laws
However, a small fraction of firms “cheap talk”