How do Korean multinational firms decide international transfer pricing?

This study examines the determinants of inter-national transfer pricing methods based on a sample of Korean international firms. Transfer pricing selection methods are classified into market-based transfer pricing and nonmarket-based transfer pricing. As the study determines, law and regulation, and external economic factors have significant relations with the market-based transfer pricing method This means that the greater the degree of legal regulations, the more firms use the market-based transfer pricing method to reduce the accusation of transfer pricing manipulation and avoid legal complications. Also the result shows that the higher the external economic restrictions, the more firms may rely on the nonmarket-based transfer pricing method in order to circumvent stringent economic regulations which hinder the free flow of funds between countries. However, tax, political, social, internal economic, location country of overseas subsidiary, and firm's size variables do not have statistically significant relations with the international transfer pricing method.