search query: @author Choi, Y. / total: 10
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Author: | Choi, Y. Day, T. |
Title: | Transfer pricing, incentive compensation and tax avoidance in a multi-division firm |
Journal: | Review of Quantitative Finance and Accounting
1998 : SEP, VOL. 11:2, p. 139-164 |
Index terms: | ACCOUNTING FINANCE TRANSFER PRICING |
Language: | eng |
Abstract: | This article examines the relation between transfer pricing and production incentives using a model of a vertically integrated firm with divisions located in different tax jurisdictions. The authors show that if divisional profits are taxed at the same marginal rate, the transfer price should be set to minimize the compensation risk faced by the manager of the buying division. For the case where divisional profits are taxed at different marginal rates, they are able to characterize the trade-off between the tax savings from setting transfer prices to reduce profitability in the high tax jurisdiction. |
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