Research On The Disclosure Of Financial Derivative In Listing Banks In China

With the development of market economy in China, the derivative financial instruments are booming, developing rapidly. Derivative financial instruments appear to provide a good opportunity for companies to reduce the cost of financing, strengthen foreign exchange risk management, and improve the efficiency in funds using. While the listing banks in China are precisely the parts mainly which take advantage of these financial derivative products. These financial derivative products bring vitality as well as huge risk to the financial industry. So how to prevent the risk of derivative financial instruments effectively, become a very important hot issues in accounting academia and financial circles. Opaque financial derivatives transactions may damage the market, which requires listing banks to disclose more and finer details of derivatives trading. As is known, the disclosure of information does not reduce the risk of these financial derivative products, but it can reveal risk of financial derivative products timely and accurate to external stakeholders, who can make appropriate decisions in accordance with the right information. So the financial sector will be able to guarantee the interests of the information users, as well as the sustained and healthy development of financial industry.First of all, this paper makes an overview about the concept and classification of derivative financial instruments and introduces the information disclosure theory, to provide a theoretical basis for later study on information disclosure of financial derivative during listing banks.Secondly, comparison on information disclosure of derivative financial instruments, among the International Accounting Standards Board, the Basel Committee, the Financial Accounting Standards Board, and the Chinese Ministry of Finance are made, to summarize their commonalities and differences. The analysts believe that the Basel Committee has the relatively most complete disclosure requirements for risk management, while the FASB has the most detailed specifications on the format and content of the disclosure, the listed banks in China can learn from them to improve the level of disclosure.After the analysis of the16listing banks in China according to their annual report2007-2011, the paper argues that the information disclosure of derivative financial instruments in listing banks basically follow the requirements "the Accounting Standards for Business Enterprises No.37:Presentation of Financial Instruments ". Industrial and Commercial Bank of China are given as the example, to analyze the information disclosure of its derivative financial instruments, then compared with disclosure practices of Bank of America, in order to improve the disclosure level of derivative financial instruments.In empirical research, based on the information, which are disclosed in the2007-2011annual report of listing banks, this paper makes multiple regression analysis, and discover the relationship between disclosure level of derivative financial instruments and the underlying assumptions, come to that the capital adequacy ratio, the audit firm type, listed whether state-owned banks as well as the size of the total assets have a significant impact on the disclosure level of derivative financial instruments. Ultimately, according to the conclusions, this paper puts forward some suggestions and countermeasures to improve the disclosure level of derivative financial instruments in listing banks.