The Effect of Legal Systems and Accounting Conservatism on Corporate Governance: The U.S. versus the U.K.(A Comparative Analysis)

Corporate Governance deals with the ways in which suppliers of finance to corporations assure themselves of getting a return on their investments. This paper analyses the effects of legal systems and accounting conservatism on corporate governance. The U.K. and American corporate governance perspective, there have fundamentally been the same goals with respect to strengthening corporate governance In comparison to the U.S vs the U.K., the value of independent directors is emphasized in the recommendations of Derek Higgs regarding corporate governance, building on the earlier work of the Cadbury Commission. In the U.S. it is the responsibility of the States and the stock exchanges to determine their corporate governance requirements. In the U.K. it is the responsibility of the Security Exchange Commission to overlook adherence to corporate governance regulations whereas its is the duty of the Sarbanes Oxley act to overlook the corporate governance rules and regulations. Theory indicates that accounting conservatism is important to establish an efficient corporate governance system in both the U.S and the UK