Title

An empirical study of voluntary transfer pricing disclosures in China

Document Type

Journal article

Source Publication

Journal of Accounting and Public Policy

Publication Date

11-1-2011

Volume

30

Issue

6

First Page

607

Last Page

628

Abstract

This paper empirically investigates the factors that affect the management's voluntary disclosures of the transfer pricing details of related-party transactions. Using Chinese data from 2004 and 2005, we hypothesize and find that firms that make voluntary disclosures of the pricing methods of related-party transactions are negatively associated with (i) a higher level of earnings management (as captured by abnormal related-party transactions) and (ii) its underlying incentives (as captured by the management's performance-linked bonuses and the firm's incentives to achieve earnings targets); further, they are positively associated with (i) a higher percentage of independent directors and (ii) a higher percentage of government ownership. Overall, our findings suggest that earnings management and its incentives, board composition, and ownership structure significantly influence the voluntary disclosure decisions of managers.

DOI

10.1016/j.jaccpubpol.2011.08.005

Print ISSN

02784254

E-ISSN

18732070

Publisher Statement

Copyright © 2011 Elsevier Inc

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Full-text Version

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Recommended Citation

Lo, A. W. Y., & Wong, R. M. K. (2011). An empirical study of voluntary transfer pricing disclosures in China. Journal of Accounting & Public Policy, 30(6), 607-628. doi: 10.1016/j.jaccpubpol.2011.08.005