Congruence of Competitive Advantage and Transfer Pricing: A Study on Selected MNCs Operating in Bangladesh


  • Md. Nur-E-Alam Siddique Senior Lecturer, Faculty of Business, ASA University Bangladesh, Dhaka, BANGLADESH
  • Alim Al Ayub Ahmed Assistant Professor, Faculty of Business, ASA University Bangladesh, Dhaka, BANGLADESH


Transfer Pricing, MNC, Taxation, Strategy, Competitive advantage, Bangladesh


For many years transfer pricing has been considered as an adherence issue whereby MNCs are lawfully required to arrange, document and file with tax revenue authorities. Moreover, most researchers have written on economics, accounting, taxation and finance aspect of transfer pricing. But, later, transfer pricing has been recognized as a strategic tool that can facilitate MNCs to achieve competitive advantage. Furthermore, there are few literatures on transfer pricing and strategy. The research question of the study was to find out how MNCs operating in Bangladesh are applying transfer pricing as a strategic tool. The study adopted descriptive research design which enabled to describe characteristics connected with the subject population. It was found out that transfer pricing was practiced to achieve internal objectives such as motivating subsidiary managers, monitoring performance of foreign subsidiaries and as a way of achieving goal synchronization between subsidiary managers and parent companies. External objectives incorporated practice of transfer pricing as a means of reducing taxes and duties as a tool of controlling foreign exchange risks, as a cash management means and as a way of evasion of foreign government interfering. It was discovered that in contrast to a purely accounting, economics and tax driven systems, transfer pricing is viewed as a tool for advancing MNCs strategies in Bangladesh. Findings pointed out that executives were not exclusively focused on compliance, accounting, economics and taxation issues as primary objectives of transfer pricing.   



Ahmed AA and Neogy TK. 2010. Forensic Accounting in Bangladesh: Emergence and Introduction Development Compilation, 3, 71-82.

Ahmed AA. 2009. Measurement and Analysis of the Extent of Timeliness in Corporate Annual Reports of Banking Sector in Bangladesh Development Compilation, 1, 45-56.

Ahmed AA. 2012. Accounting in Islamic Perspective: A Timely Opportunity A Timely Challenge ASA University Review, 6, 11-31.

Ahmed AA. 2015. Relationship between Foreign Direct Investment and Company Taxation: Case of Bangladesh American Journal of Trade and Policy, 2, 125-129.

Begum R, Ahmed AA and Neogy TK. 2012. Management Decisions and Univariate Analysis: Effects on Corporate Governance in Bangladesh Journal of Business Studies, 3, 87-115.

Blouin, J., L. Robinson, and J. Seidman. “Conflicting Transfer Pricing Incentives and the Role of Coordination,” Working paper, 2012.

Blouin, J., L. Robinson, and J. Seidman. “The Compliance Cost of the U.S. Individual Income Tax System: A Second Look After Tax Reform.” National Tax Journal 45 (June) (1992): 185-202.

Cooper, D. & Schindler, P. (2003). Business Research Methods. (7th Ed.) New York: McGraw Hill.

Czinkota and Ronkainen, (2007), Global business: Positioning ventures ahead

Donhoe, M., G. McGill, and E. Outslay. “Through a glass darkly: What can we learn about a U.S. multinational corporation's international operations from its financial statement disclosures?” National Tax Journal, (2012) 65 (4): 961-984.

Eccles, R., “Control with Fairness in Transfer Pricing.” Harvard Business Review (November-December 1985), pp. 149-161.

Ferdous, M., & Moniruzzaman, M. (2015). An Empirical Evidence of Corporate Social Responsibility by Banking Sector based on Bangladesh. Asian Business Review, 3(4), 82-87.

Grabski, S., “Transfer Pricing in Complex Organizations: A Review and Integration of Recent Empirical and Analytical Research,” Journal of Accounting Literature (vol. 4, 1985), pp. 33-75.

Graham, J., and C. Harvey. “The Theory and Practice of Corporate Finance: Evidence from the Field.” Journal of Financial Economics 60 (2001): 187-243.

Graham, J., M. Hanlon, and T. Shevlin. “Real Effects of Accounting Rules: Evidence from Multinational Firms’ Investment Location and Profit Repatriation Decisions.” Journal of Accounting Research 49 (1) (2011): 137-185.

Graham, J., M. Hanlon, nd T. Shevlin. “Barriers to Mobility: The Lockout Effect of U.S. Taxation of Worldwide Corporate Profits.” National Tax Journal 63 (2010): 1111-1144.

Harris, M., C. Kriebel and A. Raviv, “Asymjetric Information”

Hossain, M., & Quddus, M. (2015). Testing of Banking Services in Bangladesh: A Study on Prime Bank Limited Rangpur Branch. Asian Business Review, 5(2), 50-53.

Jacob, John. “Taxes and Transfer Pricing: Income Shifting and the Volume of Intrafirm Transfers.” Journal of Accounting Research 34 (2) (1996): 301-312.

Kanodia, C., “Risk Sharing and Transfer Price Systems under Uncertainty,” Journal of Accounting Research (Spring 1982), pp. 74-98

Kaplan, R. Advanced Management Accounting (Prentice-Hall, 1982).

Klassen, K. and S. Laplante. “Are U.S. Multinational Companies Becoming More Aggressive Income Shifters?” Journal of Accounting Research 50 (5) (2012b): 1245- 1286.

Klassen, K. and S. Laplante. “The Effect of Foreign Reinvestment and Financial Reporting Incentives on Cross-jurisdictional Income Shifting.” Contemporary Accounting Research 29 (3) (2012a): 928-955.

Martinson, O.B., Englebrecht, T.D. & Mitchell, C. (1999). How Multinationals Firms can profit from sophisticated transfer pricing strategies. The Journal of Corporate Accounting and Finance/Winter, pp. 91, 97-103.

Mescall, D. and K. Klassen. “How does transfer pricing risk affect premia in cross-border mergers and acquisitions?” Working paper, 2014.

Muhoho P. (2012) „Implementation of Transfer Pricing as a Business Strategy for Multinational Corporations in Kenya: University of Nairobi Unpublished research project‟.

Neogy TK and Ahmed AA. 2015. The Extent of Disclosure of Different Components of Disclosure Index: A Study on Commercial Banks in Bangladesh Global Disclosure of Economics and Business, 2, 100-110.

Quader MT, Neogy TK and Ahmed AA. 2010. Econometric Growth Rates Analysis of Basic Bank Limited in Bangladesh: An Evaluation Development Compilation, 4, 48-60.

Rahman, S., & Masoom, M. (2015). Effects of Relationship Marketing on Customer Retention and Competitive Advantage: A Case Study on Grameen Phone Ltd.. Asian Business Review, 1(2), 97-102.

Shaker, F. (2015). Compete or Cooperate: Understanding of the Relationship Levels of Firms within same Industry.Asian Business Review, 5(1), 33-37.

Simon, H., “Rationality as Process and a Product of Thought,” The American Economic Review Proceedings (May 1978), pp. 1-16.

Solomons (1965). Divisional Performance: Measurement and Control.






Original Research Article