Tax, Financial Reporting, and Tunneling Incentives for Income Shifting: An Empirical Analysis of the Transfer Pricing Behavior of Chinese-Listed Companies

Agnes W. Y. Lo · Raymond M. K. Wong · Michael A. Firth

128 citations0/0 files storedJournal of the American Taxation Association

No readable copy stored yet — this record is metadata only.

No open-access location is known for this record yet.

Literature note Cite in a project Citation map

Corporate Taxation and Avoidance Corporate Finance and Governance Auditing, Earnings Management, Governance

Abstract

ABSTRACT: This study examines tax, financial reporting, and tunneling incentives on the transfer pricing decisions of Chinese-listed companies. We use the relative gross profit ratios of related- and unrelated-party transactions to measure transfer pricing strategies. We find evidence supporting the view that transfer pricing is used to (i) increase a listed firm’s profits as the corporate income tax rate decreases, (ii) increase a listed firm’s profits if its management’s compensation is determined by reference to reported profits, and (iii) decrease a listed firm’s profits as the percentage of shares owned by the government increases (i.e., the tunneling effect). For those firms that face both tax and tunneling incentives we find that the incentives tend to offset each other such that there is no discernable earnings management.

Paper brief

Loading…

Cite this work

Citation unavailable for this work.

BibTeX RIS CSL-JSON

No public copy is stored for this record, so only the metadata is cited.

Citations in this library

Citation map →

Stored only when both papers are in the corpus — 128 citations exist upstream.

References

2000Tunneling 2005Ownership structure, corporate governance, and fraud: Evidence from China 2005Institutions, ownership, and finance: the determinants of profit reinvestment among Chinese firms 1996Debt and the marginal tax rate 2007Corporate governance and earnings management in the Chinese listed companies: A tunneling perspective 2005Corporate performance and CEO compensation in China 1996Proxies for the corporate marginal tax rate n.d.Debt and the marginal tax rate

Cited by

2014Corporate Transparency and the Impact of Investor Sentiment on Stock Prices 2021Corporate Environmental Information Disclosure and Stock Price Crash Risk: Evidence from Chinese listed heavily polluting companies 2015Value relevance, earnings management and corporate governance in China 2012Domestic Income Shifting by Chinese Listed Firms 2015Are Related‐Party Sales Value‐Adding or Value‐Destroying? Evidence from China 2013

Explore the map →

Papers that cite the same references — the relational fallback while embeddings are still backfilling.

Imported from OpenAlex (CC0) — nothing here is generated.