Ph.D., MBA, CPA, CTP, Grand Canyon University, Phoenix, Arizona, USA
This research paper summarizes the ideas of maximization of corporate welfare and basic firm theory, transfer prices among corporate subsidiaries have been found to complicate performance evaluations of subsidiaries and the parent company. The research problem addressed the lack of understanding of transfer price policy and its application to impact firm profits within three specific measures: investor return, earnings per share, and effective tax rate. The main purpose of this study was to ascertain an empirical relationship between transfer pricing policies and these financial performance measures within a study of two multinational firms. The research paper presents of an empirical result indicated statistically significant differences between the measures for each firm and allowed further comparative analysis based on other collected data. Overall, results indicated each measure of performance affected transfer pricing tax liabilities and transfer pricing may be a vehicle to improve company profitability. The results of this study may contribute to positive social change by bringing a focus to efficiency in transfer pricing, which could yield positive impacts on the economy through the reduction of international transaction costs stemming from minimization of tariffs, income tax liabilities at home and abroad, foreign exchange risk and conflicts with foreign governments’ policies. Positive social change may also be affected by providing investors a new perspective on corporate financial data based on transfer price policies and corporate performance.
Keywords: Finance, Transfer Pricing, Macroeconomy, Corporate Performance, Effective Tax Rate, Earnings Per Share, Investor Return.
JEL Classification: A10; C49; C40; C44; C58; F38; B27.
Cite as: Kasztelnik, K. (2020). Causal-Comparative Macroeconomic Behavioral Study: International Corporate Financial Transfer Pricing in the United States. Financial Markets, Institutions and Risks, 4(1), 60-75. http://doi.org/10.21272/fmir.4(1).60-75.2020.
- Adams, L. & Drtina, R. (2008). Transfer Pricing for Aligning Divisional and Corporate Decisions, Business Horizons, 51, 411-417. http://dx.doi.org/10.1016/j.bushor.2008.03.008
- Adams, C., & Coombes, R. (2003). Global transfer pricing principles and practice. London: LexisNexis UK. Available at: https://www.bloomsburyprofessionalonline.com/applib/newsitem/2488/global-transfer-pricing-principles-and-practice
- Alm, J., Martinez-Vazquez, J., & Rider, M. (2006). The challenges of tax reform in a global economy. New York: Springer. Available at: https://www.springer.com/gp/book/9780387299129
- Avi-Yonah, R. S. (2007). International tax as international law an analysis of the international tax regime. New York: Cambridge University Press. https://repository.law.umich.edu/cgi/ viewcontent.cgi?article= 1006&context=law_econ_archive
- Baker, J.C. & McKenzie, G.W. (1993). Intercompany pricing guide to the new 1993 United States rules. The Hague: Kluwer Law and Taxation Publishers.
- Baldenius, T., Melumad, N. & Reichelstein S. (2004). Integrating Managerial and Tax Objectives in Transfer Pricing, The Accounting Review, 79 (3), 591- 615. http://dx.doi.org/10.2308/accr.2004.79.3.591
- Bergstrand, J. (2012). Management accounting a cases approach. Upper Saddle, NJ: Pearson. Available at: https://www.pearson.ch/HigherEducation/Pearson/EAN/9780273757054/Management-Accounting-A-Cases-Approach
- Boos, M. (2003). International transfer pricing the valuation of intangible assets. The Hague: Kluwer Law International. Available at: https://lib.ugent.be/catalog/rug01:000788154
- Buckley, P. J. (2004). The challenge of international business. New York: Palgrave Macmillan.
- Cadwalader, W.T. (1992). Section 482 program March 5, 1992. New York: Cadwalader, Wickersham & Taft.
- Case, K.E., Fair, R.C. and Oster, S.M. (2009). Principles of microeconomics. (9th ed.). Upper Saddle, NJ: Prentice Hall. Available at: https://trove.nla.gov.au/work/7146893
- Chan, K. & Hung – Chow, L. (1997). An Empirical Study of Tax Audits in China on International Transfer Pricing”, Journal of Accounting & Economics, 23, 83-112. http://dx.doi.org/10.1016/S0165-4101(96)00445-4
- Cole, R. T. (2006). Practical guide to U.S. transfer pricing (3rd ed.). Newark, NJ: LexisNexis.
- Economic Partners (2017). Tranfer Pricing Eaton. Retrieved from https://www.econpartners.com/ 2017/08/21/eaton-v-commissioner/
- Elliott, J. & Emmanuel, C. (2000). International Transfer Pricing: Searching for Patterns, European Management Journal, 18(2), 216-222. http://dx.doi.org/10.1016/S0263-2373(99)00093-6
- Gox, R. F., & Schiller, U. (2007). An economic perspective on transfer pricing. Handbook of management accounting research. 673-695, 2. Oxford, UK: Elsevier Ltd. 673-695
- Nguyen Tan, P.(2009). Transfer pricing the Vietnamese system in the light of the OECD guidelines and the systems in certain developed and developing countries. (Unpublished Doctoral Dissertation). Jonkoping International Business School, Jonkoping University.Jonkoping, Sweden. Available at: https://www.econbiz.de/Record/transfer-pricing-the-vietnamese-system-the-light-the-oecd-guidelines-and-the-systems-certain-developed-and-developing-countries-nguyen-phat-tan/10003906745
- Samuelson, L. (1982). The multinational firm with arm’s length transfer price limits. Journal of International Economics, 13(3-4), 365–374. http://dx.doi.org/10.1016/0022-1996(82)90064-2
- Walden, G. (2003). EDGAR: The investor’s guide to making better investments. New York McGraw-Hill.
- Wong, H., Nassiripour, S., Mir, R. & Healy, W. (2011). Transfer Price Setting in Multinational Corporations, International Journal of Business and Social Science, 2(9), 10-14. Available at: http://www.revistaespacios.com/a20v41n05/20410521.html