Market Price-Based Transfer Price Systems. Empirical Evidence for Effectiveness and Preconditions
Year: 2017
Type: article
Abstract: Market price-based transfer prices for internally traded products are often used as a value measure for the decentralised management of internal production processes. The purpose of their use is the establishment of internal markets to increase efficiency and motivation in internal production, whereby market price-based transfer prices imply a particularly positive effect. This connection has to date not been proven adequately in empirical terms using specific production processes. The current paper addresses this gap and shows on the basis of a study of individual production proc- esses in 73 companies that market price-based transfer price systems as opposed to those unrelated to the market price have a much stronger efficiency and motivation effect. These effects are evalu- ated indirectly by subjective judgements of the involved managers due to a lack of measurable indicators. However, the use of market price-based transfer prices is connected to conditions re- garding the existence of a substitute with a transparent, observable market price and a similar stra- tegic importance of the business departments. The transaction basis and freedom tend to be de- signed to be consistent with each other.
Author: Michael Wolff
Language: English
Subfield: Accounting
Domain: Social Sciences
Open Access status: gold
OpenAlex ID: W2348629718