TY - JOUR
T1 - An empirical study of voluntary transfer pricing disclosures in China
AU - LO, Wai Yee, Agnes
AU - WONG, Man Kong, Raymond
N1 - We thank Michael Firth, Simon Fung, and seminar participants at the Joint Symposium of the Journal of Contemporary Accounting and Economics and Seoul National University for their helpful comments and suggestions. An earlier version of this paper was presented at the 20th Asian-Pacific Conference on International Accounting Issues and was awarded The Vernon Zimmerman Best Paper Award. We appreciate the comments received at the conference. We also thank Maggie Lai for her research assistant.
PY - 2011/11/1
Y1 - 2011/11/1
N2 - 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.
AB - 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.
UR - http://commons.ln.edu.hk/sw_master/1956
UR - http://www.scopus.com/inward/record.url?scp=84860397545&partnerID=8YFLogxK
U2 - 10.1016/j.jaccpubpol.2011.08.005
DO - 10.1016/j.jaccpubpol.2011.08.005
M3 - Journal Article (refereed)
SN - 0278-4254
VL - 30
SP - 607
EP - 628
JO - Journal of Accounting and Public Policy
JF - Journal of Accounting and Public Policy
IS - 6
ER -