This paper empirically investigates the factors that affect the management's voluntary disclosures of the transfer pricing details of related-party transactions. Using Chinese data from 2004 and 2005, we hypothesize and find that firms that make voluntary disclosures of the pricing methods of related-party transactions are negatively associated with (i) a higher level of earnings management (as captured by abnormal related-party transactions) and (ii) its underlying incentives (as captured by the management's performance-linked bonuses and the firm's incentives to achieve earnings targets); further, they are positively associated with (i) a higher percentage of independent directors and (ii) a higher percentage of government ownership. Overall, our findings suggest that earnings management and its incentives, board composition, and ownership structure significantly influence the voluntary disclosure decisions of managers.
LO, W. Y. A., & WONG, M. K. R. (2011). An empirical study of voluntary transfer pricing disclosures in China. Journal of Accounting and Public Policy, 30(6), 607-628. https://doi.org/10.1016/j.jaccpubpol.2011.08.005