Research On The Choice Motivation, Information Quality And Economic Consequences Of Fair Value Accounting

The Financial Accounting Standard Board (FASB) and International Accounting Standard Board (IASB) are always in the leading level on the research and application of fair value accounting. Now, fair value is a main measurement attribute in the standards system. In order to coordinate and convergence with international accounting standards, Chinese ministry of finance issues new enterprise accounting standards system in February 2006, in which the remarkable change is the widely use of fair value measurement attribute. However, the extensive application of fair value has induced sharp debate between the theorists, practitioners, and regulators, especially in recent years the global financial crisis caused by subprime mortgage crisis of America puts the problem to the focus of public opinions.In this context, the dissertation makes an empirical study on the choice motivation, information quality and economic consequences of fair value accounting in order to provide experience evidence for the application of fair value accounting standards, and further more, provide important information for the establishment of fair value accounting standards and the implementation of regulatory policy.The research work of the dissertation can be divided into four levels: basic research, theoretical analysis, empirical tests and policy recommendations. The corresponding contents and conclusions are as follows:Chapter 2 concerns with the basic research. This chapter which provides theoretical background and reality basis for latter empirical research, Firstly reviews the developing process of fair value in American accounting standards system, international accounting standards system and china's accounting standards system from the perspective of developing and application of fair value standards system; Secondly analyzes the specific usage and application features of fair value in china's new accounting standards system.Chapter 3 constitutes the theoretical analysis. This chapter describes the corporate contract theory, theory of accounting information quality and behavioral corporate finance theory, and assesses these three major theories combined with the use of fair value accounting by normative approach, which provides theoretical basis and support for latter empirical research.The empirical test which is the core of the entire dissertation consists of chapter 4, chapter 5 and chapter 6. Chapter 4 takes the financial assets classification of listed companies when the new accounting standards was initial implementation as the entry point, uses methods of univariate test, cross-validation and logistic regression test to discuss the economic motivation of fair value policy choice. The research shows that: the hypotheses of political cost and debt contract both pass the significance test, the debt contract also pass the significance test after controlling the impact of importance degree of financial assets, in addition, whether the management holding shares, enterprise performance and the importance degree of financial assets also affect the choice of fair value accounting policy. Chapter 5 tests the impact on accounting information quality caused by fair value accounting, i.e. the implementation effects of fair value accounting, from a perspective of relevance and conservatism. The analysis of effect of fair value accounting on accounting information relevance mainly adopts Ohlson model, i.e. price model, and the analysis of effect of fair value accounting on accounting information conservatism mainly adopts surplus-stock return model and earnings persistence model. The research shows that: 1) From the perspective of accounting information's relevance, the implementation of new accounting standards increases the joint explanatory ability of net assets per share and earnings per share to stock price, fair value changes of financial assets available for sale and the profit and loss from fair value changes of transaction monetary assets both have incremental value relevance. 2) From the perspective of accounting information conservatism, the fair value measurement attribute reduces the asymmetry degree of identifying"good news"and"bad news", so it has a definite negative impact on conservatism of accounting information. Chapter 6 studies the economic consequences of fair value accounting: the impact on corporate financial behavior. This chapter based on behavioral corporate finance theory, analyzes the effect of fair value accounting on three major financial behavior of enterprise, i.e. investment, financing and stock dividend distribution, from a perspective of bounded rationality of managers. The analysis of impact on corporate investment behavior caused by fair value accounting mainly use univariate test, cross-validation and multivariate linear regression test, impact on corporate financing behavior mainly use logistic regression and multivariate linear regression test and impact on dividend distribution behavior mainly use multivariate linear regression test. The basic conclusions are as below: 1) The sample companies in over-optimistic group will be more likely to occur over-investment, the greater the degree of profit and loss from fair value changes increase the net profit, the more serious of over-investment, in the other hand, companies in over-pessimistic group will be more likely to occur under- investment, the greater the degree of profit and loss from fair value changes decrease the net profit, the more serious of under-investment. 2) The degree of changes in fair value is significantly positive correlated with enterprise equity financing behavior (i.e. equity refinancing tendency), and is also significantly positive correlated with enterprise debt financing behavior (i.e. the asset-liability ratio and initiative debt financing proportion). Further subdivision according to the degree of fair value changes, the sample companies in over-optimistic (over-pessimistic) group, the greater the degree of profit and loss from fair value changes increase (decrease) the net profit, the higher (lower) equity refinancing tendency or asset-liability ratio and initiative debt financing proportion; 3) Profit and loss from changes of fair value per share is significant positive correlated with cash dividend per share, and the effect on cash dividend amount of the unrealized profit and loss and the realized profit and loss has no significant difference.Chapter 7 concerns with policy recommendations. This chapter takes the optimization of chinese accounting system, corporate governance and securities business development as an entry point, puts forward a countermeasure for improving fair value accounting standards and corporate financial behavior based on the inspiration of empirical research conclusion. 1) In optimizing fair value accounting standards: preparing comprehensive income table, improving the relevance of accounting information, and synchronously paying attention to conservatism of accounting information. 2) In improving corporate financial behavior: establishing a scientific common financial decision-making mechanism, establishing an effective incentive mechanism for managers and strengthening the legal protection of investors.Finally, the dissertation makes a summarization of the main research conclusion and puts forwards the further follow-up study plans and ideas according to the inadequateness of this dissertation.