Determinants of Transfer Pricing Practices: Evidence from Indonesian Energy Sector Firms
Abstract
This study investigates the determinants of transfer pricing practices in public companies in Indonesia’s energy sector during 2021–2024. Transfer pricing, although a legitimate mechanism under the arm’s length principle, is frequently misused by multinational companies to minimize tax obligations. The research tests the effect of tax, leverage, foreign ownership, and exchange rate, both partially and simultaneously, on transfer pricing. Using purposive sampling, 16 companies listed on the Indonesia Stock Exchange were selected, producing 64 firm-year observations. Data were derived from annual reports and financial statements, and analyzed using panel data regression with EViews 12. Results show that tax and exchange rate significantly affect transfer pricing, while leverage and foreign ownership do not. However, when examined simultaneously, all variables collectively exert a significant influence on transfer pricing practices. These findings highlight the complexity of interactions among corporate financial and ownership structures in shaping transfer pricing behavior.
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