Empirical Research On The Impact Of Basel Ⅲ On The Procyclicality Of Fair Value Accounting In Chinese Commercial Banks

The financial crisis has exposed the existence of fair value accounting procyclical effects and the deficiencies of financial regulation, which adversely affected the financial system stability. The introduction of Basel III therefore is transported. Regulators expect to implement a series of counter-cyclical macro-prudential policy by reducing the procyclicality of the financial system inside. However, the existing research literature about whether these reform measures can inhibit the procyclical aspects of the fair value accounting effectively and prevent system risk or not is rare. Affected by the economic globalization, China’s financial regulatory policies and accounting standards are both in the convergence to international standards. At the same time, the banking industry has undergone reform of listed shares and in a series of market-oriented development process. Therefore, to strengthen the procyclicality of fair value accounting and deepen the research of its mechanism effectiveness are helpful to improve China’s fair value accounting standards, and to coordinate its relationship with financial regulatory in the future; what’s more, they will help to prevent financial risks, providing ideas and reference for China’s banking supervision.In this context, this paper attempts to analyze the internal mechanism of the procyclical effects of fair value accounting, and to further explore the role of Basel III on fair value accounting procyclical effect, using empirical data to examine whether this financial regulatory reform has an impact on fair value accounting. In order to expand the size of the sample, we include the data of non-listed banks. The empirical studies have found that: Commercial banks in China have fair value accounting procyclicality; Compared to non-listed banks, the fair value accounting procyclicality has a stronger performance in listed commercial banks; The promulgation and implementation of Basel III could weaken the fair value accounting procyclicality, and the weakening effect of the listed commercial banks is more obvious than that of the non-listed commercial banks. In response to these findings, we propose recommendations: regulators should intensify macro-prudential supervision, and focus more on the coordination of financial regulation and supervision of accounting policies; enterprises should strengthen the disclosure of fair value accounting information by improving the transparency and normalization; investors should have a rational view of the influence the fair value which is affected strongly by the macroeconomic, and understand the information disclosure in the financial statements objectively for a more proper investment.