Research On The Pro-cyclical Effect Of Fair Value

The fair value accounting has been the hot topic in the accounting theory and practice area. The fair value accounting become into the spotlight as never before in the2008financial crisis. At present, Some western countries have studied whether fair value accounting has the pro-cyclical effect, whether the pro-cyclical of fair value has sharpened the financial crisis under the developed market economy.But we believe that this study couldn’t be apply to the emerging economies,such as market environment in our country.Therefore, under this background, studying whether fair value accounting has the pro-cyclical effect in emerging economic market, whether fair value accounting has urged economic deterioration in the financial crisis.Then we find the real reasons of the fair-value accounting pro-cyclical effect in the emerging markets.It is important in theory and reality.The first,we mainly review the pro-cyclicality theory of fair value,providing theoretical basis for the below study.Second, we use financial data of financial industry listed company in China’s emerging market to testify whether the fair value accounting has the pro-cyclical effect or not.Research shows that:on the one hand,fair value accounting has the pro-cyclical effect in the China’s emerging economy market,but this pro-cyclical effect is not significant; on the other hand,changes of the fair value included in the capital reserves shall be more consistent with market economic cycle than changes of the fair value recorded into the profits and losses of the current. Third,we analyze the causes of pro-cyclical effect in our country,combining the characteristics of emerging market economic environment in China. Finally, we put forward some ways to relieve fair-value accounting pro-cyclical effect under the emerging markets.