Research On The Institutional Arrangements And Changes Of Accounting Supervision Of Derivative Financial Instruments In China's Commercial Banks

At the beginning of 2008, France's Societe Generale bank suffered the loss of 5 billion euro because of investing on stock futures of euro shares, and the reason is that a futures trader invest stock index futures total up to 50 billion euro with investors account illegally over one years, and it is another international financial market risk triggered by derivatives financial tools. From more than 10 years ago "Bahrain" banks met huge loss of 1.4 billion because speculating in derivative financial instruments, and declared collapse overnight, to "Societe Generale" Bank of 5 billion euros huge losses, time and again in recent 10 years, the banking crisis was caused because the failure of transactions of derivatives financial instruments, and then the incident of global financial crisis occurred one after another.The water that bears boat is the same that swallows it up, the reason of initial creative of derivatives financial instruments was in order to avoid to financial market risk caused by potential price changes, however, there are different participants and different risk attitudes in the derivative financial market, speculation has become an inevitable trading action. The using of Derivatives financial instruments will also create new risks, and it will also face a credit risk, market risk, liquidity risk, settlement risk, and operation risk and so on in the transaction process. The uncertainty of Risk reflected that the information of the derivatives financial is asymmetry; the one party of two traders has the possibility of using its own information superiority to harm the interests of the other party, and establishes Opportunism action. The incidents of derivatives financial instruments transactions failure have occurred frequently because of the lack of an effective risk management to a great extent, and risk management needs of high-quality information. In this sense, the perfect information system is the main protection for risk caused by information asymmetry of derivative financial market. According to statistics, at least 70 percent of economic information comes from the accounting information, the high-quality accounting information enables information users (at least participants in financial institutions) to analyze risk of derivative financial instruments with a wide range, and internal controls, from the analysis the reasonable level of risk estimates and effectiveness judgment can be displayed, this will be help to reduce the risks arising from asymmetric information.The accounting information should be able to obtain key information from economic information, and it is value-added information activity, and more competitive information compared with other information under the cost-benefit principle, so the thesis explored the institutional arrangements of accounting supervision of derivative financial instruments base on the research background of the high-quality information will benefit risk management.The Trading volume of derivative financial instruments of the vast majority of industrial and commercial enterprises and individuals is less proportion in their assets from the current trading of China's derivative financial instrument and the risks, the risk is located in the acceptable range. The commercial banks works as a provider of financial products, they focus most of the trading volume of derivatives financial instrument business, and at the same time all kinds of risk are aggregated from the trading of derivatives, the commercial banks are the enterprises which want to regulate accounting treatments of derivative financial instrument through accounting supervision, and improve the quality of information.It is relatively easy to get ask information of all kinds of financial instruments in international markets for commercial banks because they recorded the trading of financial instruments with the stronger front; intermediate and back office system, the requirement of professional knowledge of derivative financial instrument for the business and accounting staff is relatively higher than other industries, so the commercial banks was taken as research pilot firstly, the thesis researched institutional arrangements and change of accounting supervision of derivative financial instruments, it is a action to regulate pragmatically derivatives financial instruments, it is also effective practices for formulating; developing and promoting; and testing relevant accounting rules, as well as provided valuable experience for other industries who carries out derivative financial instrument business and accounting supervision.The institutional arrangement of accounting supervision of derivative financial instrument is the Development and practice of research area of accounting supervision theory; it needs accounting, financial management, audit, finance, economics, management, information systems, and other interdisciplinary studies. New institutional economics innovative takes institution as research goals, the structural analysis method is stressed, it is not only expand the scope of study of economics, but also has a stronger explaining ability in the analysis of financial economic innovation and development issues, This study also opened a new ideas for the research.The thesis attempts to take new institutional economics as basis for establishing analysis framework, explore the development issues in the accounting supervision; take institutional arrangements for the accounting regulatory theory system perspective; provide a new reference ideas; at the same time explore both the "common" and "personality" accounting supervision theory and practice which no more research in the present study of accounting supervision of derivative financial instruments, and try to form new theoretical breakthrough in multidisciplinary and interdisciplinary research.This study would be like to provides typical case through field studies for the theory which applied to practice, and inspect the impact of information quality created by institutional arrangements changes in accounting supervision of derivatives financial instrument, particularly the cash of implementation and application of new accounting standards which deal with the derivative financial instrument used in the commercial banks, and it brings the impact and the problems that exist in practice. The thesis made a design plan of accounting supervision system of China's derivative financial instrument (generalized system arrangements), and suggestions for relationship positioning and reasonable arrangement between subject regulators; subjection and objection of regulation; objection of regulator and other relevant organization.The standardize research methods is used mainly in the thesis and case studies is included in the thesis too, both of them are corroborated each other. The research is base on the standardize research When designing fundamental framework of accounting regulatory of derivative financial instruments, the first-hand references materials are collected by viewing domestic and foreign-related theoretical research literature; investigating and visiting; inspecting the official website and so on. However, in view of China's research in this issue is a new research project, so the international practice and the successful experience and the lesson of developed countries is referenced, and more standardized researches included in case analysis.The research method combined with normative and empirical study was used in the research of institutional arrangements and changes of the accounting supervision of derivative financial instruments in China's commercial banks impacts on the quality of information. For example, the study of its impact on accounting information quality characteristics of derivative financial instruments is the normative study from the provisions of accounting standards and regulatory system, and the empirical analysis is used for the impacts of information disclosure of annual reports of listed companies; the survey analysis methods is used for the impact of the banking supervision and financial statistics; and the methods of typical case analysis is used for the impact of business process reengineering.The thesis takes the new institutional economics as the major foundation framework combined with the efficient market theory, agency theory, asymmetric information theory, hedging theory, prospect theory, and so on, the origin of the institutional arrangements of accounting supervision of derivative financial instrument is introduced in chapter 1 and 2, the create of basic framework of accounting supervision is discussed in chapter 4, chapter 5 and 6 explores the impact of institutional arranges and changes of accounting supervision according to the actual situation of commercial bank in China, chapter 7 provides the prospects of using XBRL in the technology of accounting supervision. The paper composed of seven chapters totally, the main ideas and contents as follows:Chapter 1 IntroductionThe chapter introduces the drivers of selecting topic, research methods, structural arrangements, and the main contribution and insufficient.Chapter 2 Research on the using drivers of the derivative financial instrumentsMaking a perspective of the using driver of derivative financial instruments base on the financial theory for commercial banks, because the research on the theory of driver of using derivative financial instruments for foreign commercial banks has universality and reference, and the China's research on it is still stay in the early stage of research, therefore, the researching literatures of foreign countries are reviewed mainly in this chapter; and analyzes the using driver of derivative financial instruments combine with the China's actual situation ; especially focus on the drivers for commercial banks to use derivative financial instruments for earning management and risk management, and proposes the requirements for the accounting supervision of derivative financial instruments.Chapter 3 Research on the risk of the derivative financial instrumentsThe risk types and recognizing of risk of derivative financial instrument are explored with typical case from the role of derivative financial instrument transaction of commercial banks, the demand for high-quality accounting information on risk management of derivatives financial instruments is stated with the contribution from the quality of accounting information for risk management, the research topic of accounting supervision of derivative financial instrument is introduced.Chapter 4 Research on the basic framework of the accounting supervision of derivative financial instrumentsThe chapter takes the new institutional economics as the major theoretical foundation, it approaches the nature of accounting supervision, the nature of accounting supervision is to protect the quality of accounting information and the property rights of stakeholders, the economic activities of enterprises and accounting practices will be monitored and managed base on regulation, and institutional arrangements is to try to reduce the transaction cost. The basic framework of accounting supervision of derivative financial instrument is created according to business characteristics of derivatives financial instruments and base on accounting supervision theory, the chapter analyzes the Game relationship between the power of norms and execution of accounting supervision institutional arrangements and the quality of accounting information.Chapter 5 Research on institutional arrangements of derivative financial instrument accounting supervision in ChinaThe proposal of building a corresponding accounting supervision system and model is constructed base on national conditions and distribution of supervisory right of stakeholders and the deficiencies of the accounting supervision system of derivatives financial instruments in this chapter, the typical case of internal accounting supervision of derivatives financial instruments of commercial banks is explored.Chapter 6 Research on the impact of institutional changes of accounting supervision of derivatives financial instruments in ChinaThis chapter approaches the impact of accounting information quality around the arrangements (mainly in accounting standards changes of financial derivatives financial instruments, and the convergence with the International Accounting Standards) of the institution in accounting supervision, it will impacts mainly the quality characteristics of accounting information of derivative financial instruments of commercial banks; banking supervision; financial statistics; information disclosures; and the recreation of business process and so on.Chapter 7 The Application Prospect of XBRL in accounting supervision of derivatives financial instrumentsThis chapter approaches the advantage of valuation of XBRL report in disclosure of accounting information of derivative financial instruments base on accounting theory of"Events"Approach combine with the development of information technical from the improvement of technology of accounting supervision, the chapter approaches the application feasibility of XBRL report in accounting supervision of derivative financial instruments in commercial banks, and prospects the effects after use it.