Empirical Research Of Fair Value Accounting And Financing Costs

International convergence of accounting standards is characterized by fair value is an unstoppable trend. However, due to the impact of economic efficiency and information efficiency, fair value accounting in the measurement of the bank’s financial condition or operating results because of a country’s level of development of the securities market, the legal environment, banks or securities market regulatory effectiveness, as well as a range of other institutional background characteristics of different result different from the measurement result (La Porta et al,1998). Therefore, the highly developed capital markets and the West "view" of the relationship of the fair value accounting information and stock prices as a research focus, combined with China’s economic transformation, the unique system of background to study the usefulness of fair value accounting contract in China will be more likely to get the breakthrough discovery (Liu Hao&Sun Zheng,2008).U.S. subprime mortgage crisis broke out in the United States in2007and later evolved into the global financial crisis. People have directed at fair value accounting standards that the fair value have procyclicality in the financial crisis exacerbated lead to the spread of the financial crisis. Because of economic and political pressure, governments have a corresponding adjustment to the fair value accounting, this adjustment to a certain extent, increased public doubts about fair value measurement. Measured at the fair value of listed commercial bank in China in the end what kind of impact, whether investors will increase investment risk, whether it will affect investors’ expected rate of return on the bank, caused by changes in the cost of bank financing? Fair value accounting in official use in China in2007, will be studied inthe context of China’s special economic system of China’s listed commercial bank financing costs and fair value measurement exists between certain relationship provides an opportunity. So this is mainly expected theory and contract validity theoretical basis of research since the implementation of the new standards, fair value accounting and China listed the relationship between the commercial banks interest costs, the cost of debt, in a bid to empirical analysis based on the theory of sublimation. Study the use of fair value accounting of the bank’s risk, income change, whether these changes will change investors in the bank’s future operating results are expected to change the contract entered into between the investor and the bank’s management. The text will Empirical explore our specific institutional context, the cost of equity of listed commercial banks, the relationship between the cost of debt and the fair value of the underlying mechanisms. The conclusions of this paper will provide financial regulatory agencies and accounting standards bodies to improve the guidelines, providing some suggestions to promote the reform of China’s financial instruments accounting standards.The paper is structured as follows:The first part is an introduction of the paper. The implementation of the new accounting standards marks a substantial convergence of accounting standards and to emphasize the fair value measurement attributes the introduction and use of international accounting standards as the main feature. Fair value measurement attributes the introduction and use of new accounting standards affect the largest industry is one of the financial industries, the financial industry’s main commercial banks to operate the currency and credit, and most of its assets and liabilities are financial assets and financial liabilities. Fair value measurement attributes introduced with the use of the Bank’s financial assets and financial liabilities in the recognition, measurement and reporting will change dramatically, and will have a profound impact on the banks.The second part is a literature review. Classification in order to more clearly understand the previous research on fair value and financing costs, the literature review section of this article will be from two aspects of fair value accounting and financing costs related literature to sort out. General Comment No fair value (fair value of the motive, the economic consequences and the other point of view); research and commercial banks for fair value accounting information content of financing costs (including the before financing preferences and financing impact factors); The financing behavior research.The third part is the theoretical analysis. Expectations theory, contract theory, the introduction of fair value and the basic theory of finance costs and fair value of China’s listed banks analysis, focusing on interpretation of fair value due to the quality of information changes and financial assets fair value measurement of the bank’s regulatory capital impact.The fourth part is the hypothesis and research design. Including the assumptions proposed model design and variable definitions. Based on the theoretical analysis made a total of seven assumptions, including commercial bank financing costs and fair value measurement of assets total relationship; commercial bank debt costs, the proportion of trading financial assets and the volatility of bank profits among each other the relationship between relationship; commercial bank interest cost, the proportion of trading financial assets and the bank’s capital adequacy ratio. To assumptions proposed construct a total of eight models. The bank calculated using the Capital Asset Pricing Model CAPM derived cost of equity and cost of debt, bank interest expense divided by interest-bearing sources of funds, the fair value of assets divided by total assets ratio represents trading financial assets percentage with trading financial assets divided by two financial assets (financial assets held for trading and available-for-sale financial assets), and representatives of trading financial assets accounted for the fair value measurement of financial assets ratio, and other variables and control variables defined.The fifth part is the empirical result and analysis. Include the variable descriptive statistical analysis, correlation analysis between the variables and panel data regression results analysis. The regression results show significant positive correlation assets to total assets ratio of the bank’s equity financing costs and fair value measurement, the relationship of the proportion of the total assets of the bank’s cost of debt and the fair value measurement of assets is not significant. In other words, the higher the proportion of the fair value of assets to total assets, the higher cost of equity financing. The cost of bank debt and the fair value measurement of trading financial assets held by the proportion of a significant negative correlation between the cost of bank equity trading financial assets held by the proportion of significant positive correlation.The sixth part is the research results and the policy recommendations. This study concluded that the use of fair value does impact bank funding costs. Changes in the fair value of trading financial assets on bank current net profit impact, this article build model proved the fair value measurement of financial assets held by banks, the higher the proportion of trading financial assets held bank when where profit volatility rate is smaller. Smaller bank profit volatility, lower the cost of bank debt. Launched the trading of financial assets held by the higher proportion of the conclusion of the higher cost of bank debt, the empirical results also prove this conclusion. In the fair value of assets held by banks, financial assets held for trading and available-for-sale financial assets are affected by the bank’s capital adequacy ratio is different, trading financial assets held more conducive to the bank to improve its capital adequacy ratio. This study found that the bank’s capital adequacy ratio is lower in financial assets held strategy, the more likely financial assets held for trading, which is the fair value of trading financial assets, the higher the share of the two financial assets ratio.The main contribution of this paper:First, this study is innovative. Explore the fair value of China’s commercial banks financing costs (cost of equity financing and debt financing costs), built between the cost of bank equity, cost of debt and the fair value of the model, studies have shown that the fair value from an empirical point of. view, banks’ equity the mutual relationship between the cost and the cost of debt and the underlying mechanisms.Second, this study found that the impact of differences of trading financial assets are measured at fair value on the banks’cost of equity and cost of debt, and the study found that tradable financial assets affect the volatility of bank profits to affect the cost of bank debt trading financial assets by affecting capital adequacy ratio to affect the cost of bank equity to provide empirical evidence for the study of the impact of the fair value of the cost of bank financing. The conclusion of this article great importance to the stability of the banks’profits, the bank’s cost of debt and pay more attention to risk; pay more attention to the bank’s regulatory risk in China’s special economic context, banks’ equity capital. The conclusion of this paper will provide a realistic basis for financial regulators and accounting standard setters to improve the financial regulatory guidelines and accounting standards.