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Transfer Pricing and the Control of Internal Corporate Transactions

Transfer Pricing and the Control of Internal Corporate Transactions One potential weakness of all divisional profitability schemes is their inability to capture synergies among business units. One way of managing this problem is to design a transfer pricing scheme that attempts to assign common costs and benefits to different business units. What makes transfer pricing both so interesting, and such a challenge, is that the solution involves finding a way to encourage divisional managers whose pay is likely to depend on such transfer prices to reveal their private or unbiased information about the firm's costs in a way that serves the interest of the rest of the firm. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Applied Corporate Finance Wiley

Transfer Pricing and the Control of Internal Corporate Transactions

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Publisher
Wiley
Copyright
Copyright © 2020 Cantillon and Mann
ISSN
1078-1196
eISSN
1745-6622
DOI
10.1111/jacf.12393
Publisher site
See Article on Publisher Site

Abstract

One potential weakness of all divisional profitability schemes is their inability to capture synergies among business units. One way of managing this problem is to design a transfer pricing scheme that attempts to assign common costs and benefits to different business units. What makes transfer pricing both so interesting, and such a challenge, is that the solution involves finding a way to encourage divisional managers whose pay is likely to depend on such transfer prices to reveal their private or unbiased information about the firm's costs in a way that serves the interest of the rest of the firm.

Journal

Journal of Applied Corporate FinanceWiley

Published: Mar 1, 2020

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