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Transfer Pricing Aggressiveness And Financial Derivatives Practices: Empirical Evidences From United Kingdom

Author

Listed:
  • Ricardo Santos

    (SONAE)

  • Samuel Pereira

    (Faculdade de Economia do Porto)

  • Elísio Brandão

    (Faculdade de Economia do Porto)

Abstract

Multinational corporations (MNCs) have long taking consideration into transfer pricing as a critical aspect of their tax management policies. The present study aims to identify the influence of intra-group financing using derivatives instruments on transfer pricing aggressiveness. Based on a selective sample of 117 publicly listed U.K. multinational enterprises over 2006 and 2014 (1053 firms years observations), the regression model indicates derivatives to be significantly associated with transfer pricing aggressiveness behaviors. More specifically, interest rates and foreign exchange rates volatility have a positive contribution on magnifying international transfer pricing aggressiveness. Additionally, the multinationality of MNCs also exhibits a significant impact on entities tax governance. The overall empirical findings present reasonable results augmented by an additional analysis with recourse to effective tax measures.

Suggested Citation

  • Ricardo Santos & Samuel Pereira & Elísio Brandão, 2016. "Transfer Pricing Aggressiveness And Financial Derivatives Practices: Empirical Evidences From United Kingdom," FEP Working Papers 583, Universidade do Porto, Faculdade de Economia do Porto.
    • Handle: RePEc:por:fepwps:583
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    Transfer Pricing; Derivative Instruments; Multinationality; Aggressiveness and Tax Avoidance;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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