| Basic economic theory offer reasonable basis for the financial institutions to use fair value accounting for financial reporting (Heaton et al.,2010). The fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As a relatively new measurement model, the fair value can provide the market participants real-time and useful information. Therefore the fair value information have a value of relevance (Ahmed&Takda,1995;Barth,1994,1996; Eccher et al.,1996; Wang Yutao et al.,2010; Liu Yongze&Sun he,2011). And thus the fair value accounting is being recommended by the domestic and foreign accounting standard setting boards, so far the fair value accounting has been widely applied in many countries.The financial turmoil in2008not only had a profound impact on the world economy but also sparked the question of fair value accounting. In the discussion about fair value, the most controversial question is whether fair value accounting is pro-cyclical which can bring about the markets risk in the bank system. In the existent research literature,some scholars have confirmed the pro-cyclicality of fair value accounting (Robert Boyer,2007; Plantin et al.,2008; Allen et al.,2008; Heaton et al.,2010), but there are other scholars argue that fair-value accounting is not significantly pro-cyclical (Laux C&Leuz C.,2009; Badertscher et al.,2010; Blankespoor et al.,2010). Thus it can be concluded that there is no consensus on the cyclical problem about fair value accounting. Besides there is little deep study about the generating mechanism and functionary channels of the pro-cyclical fair value accounting, this will not only influence the fair value accounting reform in the future, but also have the direct bearing on the confirmation of the direction in financial regulation. Therefore this paper tries to research into the problem from a new perspective of the capital buffer in commercial banks, and it makes use of96commercial Banks’ annual data from2007to2012in our country to study the pro-cyclical characteristics of fair value accounting, this paper also makes a deep analysis on the generating mechanism and functionary channels of the pro-cyclical fair value accounting. The research result is beneficial to the stability of financial system in our country, and it will give full support to the reformation of accounting standards which is conducive to the construction of the long-term mechanism for financial system.The main content of this paper includes the following several parts:Chapter One:This part can be divided into the following four aspects:(1) Analyze the background and motivation of the study in this study;(2) Presents the clews and the methods of this research;(3) Provides a brief overview of the paper’s structure and draw the Framework map;(4) Summarize the innovative points of this paper.Chapter Two:Literature review. This chapter presents a literature review, including the cyclical and counter-cyclical capital buffer behavior of banks, the relationship between fair value accounting and systemic risk in banking sector and the earnings and capital management in banks. From the literature review,we can know the present situation and development trend of the research. In the process of literature reviewing, the author expatiated the problems existing in the present study and prospected about the further research work in related fields.Chapter Three:The research of the counter-cyclical capital buffer. Firstly, the study analyze the motivation of Banks to hold capital buffers; and then the author analyze the generating mechanism and functionary channels of the capital buffer in detail. Through theoretical analysis the article put forwarded the first research assumption:bank sector in China takes on a counter-cyclical capital buffer behavior. When doing the research design for this assumption, the author structured model No.1. The results of regression analysis showed that the first research assumption is correct, capital buffers of Chinese banks do have counter cyclical behavior.Chapter Four:The study of the procyclical effects brought by the fair value accounting from the perspective of capital buffer. The cyclicality of capital buffer and pro-cyclicality of fair value accounting are studied separately in most previous studies, but this section combine the two together, study the procyclical effects brought by the fair value accounting from the perspective of capital buffer. Firstly, the author analyze the generating mechanism, functionary channels and the econ-omic consequences of the fair value accounting’s procyclicality in detail. And then the assumption of two is proposed_based on the previous theoretical analysis, the content of the No.2assumption is that capital buffers has a negative impact on the pro-cyclical effect of fair value accounting. Through constructing the model No.2and regression the panel data, the view of the No.2assumption was been confirmed.Chapter Five:The further research of the importance of the commercial banks to hold capital buffer. This section mainly focus on problem of capital manage-ment in banks, including the following three aspects:(l)The motivation of banks to do capital management;(2) Summarize the ways of doing capital management;(3)Empirically test that whether Chinese commercial banks do capital management by cherry picking when to sell the available for sale financial assets.In the process of empirical test, the author put forward the third research assumption of this paper through the theoretical analysis:commercial banks in China do capital management by using the available for sale financial assets, and when the capital buffer hold by banks below a certain threshold, the behavior of banks to do capital management will become more significantly. In order to confirm the existence of the certain threshold, this text build model (a) and model (b). The results of regression analysis proved the correctness of third research assumption in this paper, and when the capital buffer below5%fractile of Cbuf, the behavior of banks’management board to do capital management become more significant.Chapter Six:Research conclusion and suggestion.Firstly this part summarizes the research conclusion of the paper as follows:(1)Capital buffer of Chinese banks do have countercyclical behavior, and that is to say there is a significant relationship between the bank capital buffer and the business cycle, when the macro economy is in a boom, commercial banks in our country will cope with the increasing risk brought by the uncertainties of future economic.(2)In our country’s banking industry the fair value accounting do induce the pro-cyclicality, but bank capital buffer is obviously effective in relieving this pro-cyclical effect, this is expressed in a specific negative relationship between the amount of capital buffers and the fair value accounting’s pro-cyclicality, the higher of the capital buffer, the lighter of the pro-cyclicality.(3)The commercial Banks in China do capital management by cherry picking when to sell the available for sale financial assets, and when the capital buffer below8%fractile of Cbuf, the behavior of banks’management board to do capital management will become more significantly, the result of this piece also indicates that it is meaningful for banks to hold a certain amount of capital buffer,because it can maintain the financial market liquidity, and enhance the stability of financial system.Then this paper presented some suggestions for the prudential regulation of the financial stability and the formulation of accounting standards, and it can highlight the aim and significance of this paper. Besides at the end of the article the author point out the deficiency of this paper, and clarify the future development direction of the study.The researches of the banks’capital buffer cyclical behaviors and the pro-cyclical effects of fair value accounting is a great many in academia,but the research about the combination of two is less. As a matter of fact, during the existing literatures about the pro-cyclical effects of fair value accounting, there has been almost no consideration for the banks’capital buffer behaviors. And there may be a problem of omitting variables which enlarge the capacity of fair value accounting to amply systemic risk in banking system. So it is of great significance for this paper to research into the pro-cyclical effect of fair value accounting from the angle of capital buffer in Commercial banks. Followed are the innovation points of this paper:(1) The innovation of the research field. In the domestic and international academic study in the past, the separate research for capital buffer or the fair value accounting has been many, but to a certain extent the separated researches affects the depth of research about the pro-cyclical effects of fair value accounting. Therefore in this paper, the author study the pro-cyclical effects which is brought by the fair value accounting from the new perspective of bank’s capital buffer in the commercial banks, this will not only strengthen the degree of fair value accounting’s research, but also expand the research field about the relationship between fair value accounting and the financial stabilization. At the same time, this article put the problem of capital management into the research framework, strive to analyze the importance of the commercial banks to hold capital buffer from the perspective of available for sale financial assets, which can expand the research field of this problem.(2) The innovation of the study method. I used the study method combined with normative and empirical research in this paper. This method not only avoid the defects that the pure normative research has no data to support the correctness of the theory, but also the defects of the pure empirical research without theory to support. The study method of the combination of normative and empirical research will help us get more scientific and strictness research conclusion.(3) Extension and updation of the research data. Most of the existing research literatures fixed the research sample into the16listed commercial banks, but as the number of bank institutions increasing rapidly, the study conclusions of the listed commercial banks lack accuracy and persuasion. So this paper choosed96Chinese commercial Banks’ annual data from2007to2012as the sample, it is sufficient and comprehensive to get the conclusions that are more representative, reliable and general applicable. |
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