An Empirical Analysis of Current US Practice in Evaluating and Controlling Overseas Operations

Duangploy, Orapin; Gray, Dahli

doi:10.1080/00014788.1991.9729845

Cited by 10 publications

(4 citation statements)

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“…2 See Chenhall (2003) and for detailed and extensive literature reviews. 3 See Hawkins (1965), Mauriel (1969), McInnes (1971), Robbins &Stobaugh (1973), Person andLessig (1979), Morsicato and Diamond (1980), Abdallah and Keller (1985), Appleyard, Strong, &Walton (1990), andDuangployo andGray (1991). 4 In addition, if not available from the other sources, some statistical data were collected by telephone calls, and e-mails.…”

Section: Notesmentioning

confidence: 99%

The determinants of multiple forms of controls in foreign subsidiary manager evaluations

Kihn

2008

IJAAPE

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Section: Notesmentioning

confidence: 99%

The determinants of multiple forms of controls in foreign subsidiary manager evaluations

Kihn

2008

IJAAPE

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“…2 Both U.S. and U.K. MNCs exhibit a strong tendency towards centralised treasury management functions (Mathur, 1985a;Collier and Davis, 1985). However, FX transaction exposure appears to be more tightly controlled for domestic subsidiaries of U.K. MNCs compared to their foreign subsidiaries (Collier and Davis, 1985), presumably due to the adverse impact of FX rate fluctuations on performance evaluation measures (see also Duangploy and Gray, 1991). The centralisation of the treasury management function is a prerequisite for managing and hedging global exposure since it allows firms to offset their exposures in various currencies and facilitates the attainment of economies of scale in the use of financial instruments.…”

Section: Literature Reviewmentioning

confidence: 99%

The Foreign Exchange Exposure Management Practices of Finnish Industrial Firms

Hakkarainen¹,

Joseph

Kasanen³

et al. 1998

Financ Manag Account

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This study employs questionnaire survey and financial accounting data to extend earlier empirical work on the foreign exchange (FX) exposure management practices of Finnish industrial firms. The paper concentrates on: (i) the form that FX corporate hedging policy takes; (ii) the control of FX procedures and trading; and, (iii) our respondents' perceptions about their ability to predict FX rate changes for hedging decisions. Our results indicate that the extent to which firms hedge FX exposure depends on the type of exposure and the form that FX hedging policy takes. Also, a significant number of the firms pursue FX hedging strategies on the expectation of attaining trading profits and this strategy appears to be accommodated within their FX policies. This feature is not explicitly demonstrated in previous studies. Finnish firms hedge a much higher proportion of both transaction and translation exposures compared to economic exposure. We partly attribute this emphasis to the requirements of the Finnish Accounting Act, which came into effect in 1993. The organisational, historical and financial settings of the firms also have significant impacts on exposure management practices. The overall implication of those results is that firms respond to changes in the financial, economic and regulatory environments in which they operate.

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“…Kaplan (2006) defined profit center as “a unit, in which the manager has almost complete operational decision‐making responsibility and is evaluated by a straightforward profit measure.” Abdallah and Keller (1985) perform a study on performance evaluation of divisions of MNFs by surveying 64 firms and report that 82% use the same measures to evaluate divisional managers as they use to evaluate divisions. Duangploy and Gray (1991) surveyed 135 MNFs and found that divisional profit is used as a performance measure by 90.1% of the respondents. These studies provide ample motivation for using local profits to evaluate and encourage local managers' performance.…”

Section: Introductionmentioning

confidence: 99%

Transfer Pricing and Sourcing Strategies for Multinational Firms

Shunko

Debo

Gavirneni

2014

Production and Operations Management

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T aking advantage of low tax rates using transfer pricing and taking advantage of low production costs using offshoring are two strategies multinational firms (MNFs) use to increase profits. We identify an important trade-off that MNFs face in setting their transfer prices: the conflict between (i) the incentive role and (ii) the tax role of the transfer price. For MNFs, we find the profit-maximizing transfer-pricing strategies that motivate divisional management to (i) make good sourcing decisions and (ii) take advantage of favorable tax rates. We quantify the absolute and relative maximum inefficiency in terms of the after-tax MNF's profit change from using a single transfer-pricing system as compared to the dual transfer-pricing system. We show that the highest relative loss is attained when the average sourcing cost and the tax differential are high. We demonstrate that the highest absolute loss is attained when the average outsourcing cost is approximately equal to the offshoring cost. We extend our results to two practical variations in MNF structures: an MNF that faces operational constraints on its offshoring capacity and an MNF that uses compensation contracts linked to after-tax firm-wide profits. Our insights help MNFs' managers identify when to use single and dual transfer-pricing systems.

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An Empirical Analysis of Current US Practice in Evaluating and Controlling Overseas Operations

Cited by 10 publications

References 1 publication

The determinants of multiple forms of controls in foreign subsidiary manager evaluations

The determinants of multiple forms of controls in foreign subsidiary manager evaluations

The Foreign Exchange Exposure Management Practices of Finnish Industrial Firms

Transfer Pricing and Sourcing Strategies for Multinational Firms

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