Interaction of Market Discipline and Public Policy : Discussion

The remarks in this paper consist of two parts. The first part concerns the linkages established in the three excellent papers among accounting, corporate governance, and market discipline. The second part discusses the possible uses and abuses of market discipline to define and develop efficient accounting institutions. Several speakers have referred to the choice of whether we look at the glass of market discipline to be half full or half empty. Experience with the promise and failure of market discipline in accounting suggests that we would be best off if we keep an open mind, and assess the efficient application of market discipline on a case-by-case basis. Neither general reliance on, nor the avoidance of, the market discipline offers the prospect of developing efficient accounting institutions