The influence of management perception of environmental variables on the choice of international transfer-pricing methods

Research output: Journal PublicationsJournal Article (refereed)Researchpeer-review

20 Citations (Scopus)

Abstract

In this paper, we provide an empirical study of the association between the management's perception of the importance of environmental variables and their choice of international transfer-pricing methods in the context of a developing economy. Given the sizable investment flowing to developing countries and the amount of economic exchange that occurs through foreign investment in these countries, we believe this is a significant issue. For this study, we collected the data from field interviews with the management of large foreign investment enterprises (FIEs) in China. These FIEs include mainly investors from the United States, Japan, and Europe. Our evidence indicates that the more important management perceives the interests of local partners and the maintenance of a good relationship with host government to be, the more likely that the FIE will use a market-based transfer-pricing method. On the other hand, the more important the management perceives foreign exchange controls in transfer-pricing decisions, the more likely the FIE will choose a cost-based method. Finally, there is a moderate agreement between U.S. and non-U.S. FIEs on the relative importance of the environmental variables.
Original languageEnglish
Pages (from-to)93-110
Number of pages18
JournalThe International Journal of Accounting
Volume39
Issue number1
DOIs
Publication statusPublished - 1 Jan 2004

Fingerprint

Transfer pricing
Foreign investment
International transfers
Economic exchange
Empirical study
Relative importance
Foreign exchange
Costs
Pricing decisions
China
Investors
Developing economies
Japan
Government
Developing countries

Keywords

  • Environmental variables; Foreign investors; International transfer-pricing; Major developing economy

Cite this

@article{e59c71377bac4b739fd85bfb512c347e,
title = "The influence of management perception of environmental variables on the choice of international transfer-pricing methods",
abstract = "In this paper, we provide an empirical study of the association between the management's perception of the importance of environmental variables and their choice of international transfer-pricing methods in the context of a developing economy. Given the sizable investment flowing to developing countries and the amount of economic exchange that occurs through foreign investment in these countries, we believe this is a significant issue. For this study, we collected the data from field interviews with the management of large foreign investment enterprises (FIEs) in China. These FIEs include mainly investors from the United States, Japan, and Europe. Our evidence indicates that the more important management perceives the interests of local partners and the maintenance of a good relationship with host government to be, the more likely that the FIE will use a market-based transfer-pricing method. On the other hand, the more important the management perceives foreign exchange controls in transfer-pricing decisions, the more likely the FIE will choose a cost-based method. Finally, there is a moderate agreement between U.S. and non-U.S. FIEs on the relative importance of the environmental variables.",
keywords = "Environmental variables; Foreign investors; International transfer-pricing; Major developing economy",
author = "CHAN, {Koon Hung} and LO, {Wai Yee, Agnes}",
year = "2004",
month = "1",
day = "1",
doi = "10.1016/j.intacc.2003.12.004",
language = "English",
volume = "39",
pages = "93--110",
journal = "International Journal of Accounting",
issn = "1094-4060",
publisher = "Elsevier BV",
number = "1",

}

The influence of management perception of environmental variables on the choice of international transfer-pricing methods. / CHAN, Koon Hung; LO, Wai Yee, Agnes.

In: The International Journal of Accounting, Vol. 39, No. 1, 01.01.2004, p. 93-110.

Research output: Journal PublicationsJournal Article (refereed)Researchpeer-review

TY - JOUR

T1 - The influence of management perception of environmental variables on the choice of international transfer-pricing methods

AU - CHAN, Koon Hung

AU - LO, Wai Yee, Agnes

PY - 2004/1/1

Y1 - 2004/1/1

N2 - In this paper, we provide an empirical study of the association between the management's perception of the importance of environmental variables and their choice of international transfer-pricing methods in the context of a developing economy. Given the sizable investment flowing to developing countries and the amount of economic exchange that occurs through foreign investment in these countries, we believe this is a significant issue. For this study, we collected the data from field interviews with the management of large foreign investment enterprises (FIEs) in China. These FIEs include mainly investors from the United States, Japan, and Europe. Our evidence indicates that the more important management perceives the interests of local partners and the maintenance of a good relationship with host government to be, the more likely that the FIE will use a market-based transfer-pricing method. On the other hand, the more important the management perceives foreign exchange controls in transfer-pricing decisions, the more likely the FIE will choose a cost-based method. Finally, there is a moderate agreement between U.S. and non-U.S. FIEs on the relative importance of the environmental variables.

AB - In this paper, we provide an empirical study of the association between the management's perception of the importance of environmental variables and their choice of international transfer-pricing methods in the context of a developing economy. Given the sizable investment flowing to developing countries and the amount of economic exchange that occurs through foreign investment in these countries, we believe this is a significant issue. For this study, we collected the data from field interviews with the management of large foreign investment enterprises (FIEs) in China. These FIEs include mainly investors from the United States, Japan, and Europe. Our evidence indicates that the more important management perceives the interests of local partners and the maintenance of a good relationship with host government to be, the more likely that the FIE will use a market-based transfer-pricing method. On the other hand, the more important the management perceives foreign exchange controls in transfer-pricing decisions, the more likely the FIE will choose a cost-based method. Finally, there is a moderate agreement between U.S. and non-U.S. FIEs on the relative importance of the environmental variables.

KW - Environmental variables; Foreign investors; International transfer-pricing; Major developing economy

UR - http://commons.ln.edu.hk/sw_master/1562

U2 - 10.1016/j.intacc.2003.12.004

DO - 10.1016/j.intacc.2003.12.004

M3 - Journal Article (refereed)

VL - 39

SP - 93

EP - 110

JO - International Journal of Accounting

JF - International Journal of Accounting

SN - 1094-4060

IS - 1

ER -