AAA Spark Meeting of Regions

An Empirical Investigation on the Relationship between Non-Arm's-Length Transfer Pricing and Related Party Transactions

• In Event: Operating Leases and Non Arms Length and Leases

Abstract

In this study we examine the the relationship between Non-Arm's-Length Transfer Pricing (hereafter NTP) and related party transactions (hereafter RPTs). Using a sample consisting of 23,837 firm -year observations from listed firms in China in the sampling period of 2006-2018, we find that the NTP is significantly positively correlated with Total RPTs, Complex RPTs, Sales RPTs or Purchase RPTs, but negatively correlated with non-operating RPTs. The disclosure of transfer pricing methods provides incremental value relevant information beyond total RPTs. In addition, we also find that foreign shareholding mitigates the effect of NTP on complex RPTs、sales RPTs and purchase RPTs respectively. Finally, we divide listed enterprises into state-owned enterprises (hereafter SOEs) and private-owned enterprises. The empirical results of this study indicate that SOEs engage in more RPTs than private-owned enterprises

Authors

• Wen-Jye Hung, Min Jiang University

• Tsui-Lin Chiang, Fu Jen Catholic University

• yiyin ruan, Minjiang University

• Wenyu Chen, Minjiang University

• Yi-Ting Pan, Miniang University