Research On The Impact Of Fair Value Measurement On Loan Contract

On January29,2014, the Ministry of Finance issued the revised newaccounting standards: China Accounting Standards No.39—Fair Valuemeasurement. It required that the listed companies must implement thisstandards from July1,2014. The issuance of this accounting standardsintegrated the content of fair value which scattered in different accountingstandards previously into a separate accounting standards. As the guideline ofpractical application to fair value, it made the accounting treatment associatedin the guidance of the guidelines. It will be more convenient to the operation ofFair value accounting, which is the expression of continue to use fair valuemeasurement in China. But compared with the large-scale introduction of fairvalue in accounting standards, the scope of fair value application was relativelysmall in accounting practice. The application of fair value in practical can’treflect the substance of fair value. In this case, it is necessary to discuss theeconomic consequences after the fair value measurement was introduced.The study of fair value accounting is facile currently in China. Most of theliterature are comment and introduction of the International AccountingStandards. Empirical research literatures focused on the impact of fair value toequity investors and pay contract due to the affection of foreign research ideas.With the Current situation of small-scale corporate debt and debt financing ismainly from banks in China, bank is the major lender to the companies. Howbanks will look at the impact of fair value’s application to accountinginformation? So the purpose of this study is that how the fair value will affectthe signing of the loan contracts. The main methods in this paper is theoretical analysis and empiricalanalysis. The theoretical analysis part is based on Fair value measurementtheory, debt contract theory, information asymmetry and signal transmissiontheory. This paper analysis the application status of fair value currently firstly,then it analyzes the impact of fair value to the loan contract in the view ofcontract function of accounting information, so that it can provide a theoreticalbasis to The latter part.In empirical analysis part, this paper studies the impact of the fair value tothe loan contract, including the size of the overall loan, different term loans andlending rates, and proposes the hypotheses. The first hypotheses is that in theaspect of the size of the overall loan the recurring gains and losses is higher thanthe changes in fair values related to the asset-liability ratio. For the correlationwith different maturities of loans, we put forward to the second hypotheses andthe third hypotheses. We assume that the changes in fair values is negativelycorrelated to the long-term loan, and positively related to the short-term loan.For the correlation with lending rates of loan, we put forward to the forthhypotheses that the changes in fair values is positively related to the lending rate.With the data of listed companies in Shanghai and Shenzhen A-share marketsduring2007to2013, we found that, through empirical testing, the correlationbetween bank lending and recurring gains and losses is higher than the changesin fair values which is negatively correlated to the size of the overall loan. Sothe first hypotheses is verified. And the second hypotheses and third hypothesesare verified due to the result which the changes in fair values is negativelycorrelated to the long-term loan, and positively related to the short-term loan.But the forth hypotheses can’t be verified by empirical test because of that thelending rate is cut down with the higher changes in fair values.Finally, with the practical application of fair value we give suggestionsfrom three aspects disclosure of fair value information, improvement of the application environment of fair value, introduction of valuation techniques andbank lending decisions. So the sign of loan contract will more reasonable andeffective by increasing operability of fair value measurement and providingmore reliable and useful accounting information.