| Summary: | The transfer pricing, literature indicates that an investigation of
some aspects of this subject could usefully be undertaken in order to
contribute to the understanding of transfer pricing in both domestic and
international markets. This study aims at exploring the current state of
transfer pricing practice and establishing the importance attached to the
ranking of transfer pricing determinants (i. e. objectives and environmental
variables) and the extent to which the ranking varies across
markets, industry, and according to the transfer pricing method used. It
also seeks to discover interrelationship among the transfer pricing
determinants in order to produce a reduced set of basic factors. Lastly,
it aims at evaluating the relationship between transfer pricing
determinants and transfer pricing methods and at discovering a means of
predicting the latter from the company's perception of the relative
importance of these determinants.
To achieve the above objectives, an empirical study covering both
domestic and international markets was undertaken in UK companies. The
conclusions are concerned with transfer pricing policy, methods currently
used, and problems apparent in practice. The overall ranking-by survey
respondents of the transfer pricing determinants is given as well as the
results of tests of certain hypotheses which relate to this ranking. The
transfer pricing determinants used in the survey for domestic and
international. markets (twelve and twenty respectively) have been reduced
by Factor Analysis to four and six factors. The study made use of the
results to obtain measures of the ranking of discovered factors. Finally,
the relationship between the transfer pricing determinants and transfer
pricing methods was quantitatively evaluated in the form of a set of
classification functions by using Multi-Discriminant Analysis. The
classification functions are able to predict the transfer pricing method
actually used in companies with an acceptable degree of success. The
study's results have been reviewed with a small number of senior managers
who are involved in establishing transfer pricing policy within their
companies. === Egyptian Government and Al-Azher University
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