Determinants and consequences of transfer pricing autonomy: An empirical investigation

Clara Xiaoling Chen, Shimin Chen, Fei Pan, Yue Wang

Research output: Contribution to journalArticlepeer-review


Top management of a multidivisional firm needs to strike a balance between providing transfer pricing autonomy to divisional managers and retaining some level of control to prevent dysfunctional behavior. Little empirical evidence exists on how top management makes this trade-off. Drawing on agency theory, we predict that transfer pricing autonomy is influenced by intermediate product standardization, foreign investment, tax rate difference, and the weight on firm-level performance measures in the divisional manager’s performance evaluation. We also predict that the extent of mismatch between transfer pricing autonomy and organizational characteristics leads to lower perceived fairness and perceived transfer pricing effectiveness by divisional managers. Using data collected from a cross-sectional survey of 210 divisional managers, we find results consistent with our predictions.

Original languageEnglish (US)
Pages (from-to)225-259
Number of pages35
JournalJournal of Management Accounting Research
Issue number2
StatePublished - Sep 1 2015


  • Agency theory
  • Autonomy
  • Decentralization
  • Transfer pricing

ASJC Scopus subject areas

  • Business and International Management
  • Accounting

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