Value Relevance Research Of Fair Value Measurements On China's Listed Commercial Banks

With the development of capital markets,investment decision makers focus on both the reliability and relevance of accounting information instead of barely reliability.Firms begin to use historical cost and fair value measurements together.Fair value are most widely used in financial industry.Since 2007,China's commercial banks have implemented the new accounting standards issued in 2006,where the financial instruments are re-classified and measured by fair value.The Ministry of Finance issued Enterprise Accounting Standard No.39,Fair Value Measurements in 2014,which provides a uniform definition of fair value and a framework for measuring fair value.Moreover,it specified the three levels of fair value measurements and explained the basis for stratification.Based on previous studies,this paper tests the value relevance of fair value measurements and fair value hierarchy,and discusses how level conversion and Standard No.39 influence the value relevance.Using a sample of annual reports by China's listed commercial banks from 2007 to 2015,this paper tests the value relevance of fair value and fair value hierarchy based on the price model.It also introduces dummy variables ‘transfer' and ‘year' to discuss how the conversion and the new accounting standards affect the value relevance.Through correlation and multiple regression analysis,this paper concludes that assets of commercial banks measured by fair value mode have value relevance,but it's not with the liabilities;only the Level 2 assets have value relevance;the level transfer and Standard No.39 both increase value relevance of fair value and fair value hierarchy.This paper provides the data support for the implementation of China's accounting standards and the convergence of China's accounting standards and international standards,and helps investment decision makers to use fair value information.