The Analysis On The Impact Of Parent Company Which Is Based On Equity Concentration On The Pricing Behavior Of Its Subsidiary Company

Since 1990s, economic globalization has become a trend. To adapt to the fierce competitive environment, enterprise group, especially large-scale enterprise group, has become an important organization form for enterprises. Enterprise group is usually a corporation community which is bonded by a link - capital. The relationship between a parent company and each capital-related company (subsidiary company) is very complex. Equity control is the basic mode for a parent company to control its subsidiary company, and difference exists in the controlling power and influence formed by different equity relations. Whether the controlling power of a parent company is large or small will further influence the subsidiary company's determination of transfer price. Based on the theory of company management and transfer pricing, the paper first analyzes the route by which a parent company influences the pricing behavior of its subsidiary company through empirical analysis. Then, via three aspects - the management target of a parent-subsidiary corporation, the degree of business contact and the control mode by which a parent company manages the pricing behavior of its subsidiary company, the paper analyzes the influence which the equity relation of a parent-subsidiary corporation exerts on three kinds of subsidiary companies - wholly-owned company, holding company and joint stock company. Accordingly, the paper puts forward related applicable pricing methods. Finally, the paper examines the theory that equity relation influences the implement of transfer pricing. To summarize, the paper is of important academic value and practical significance for enterprise groups to understand the influencing factors of transfer pricing and adopt suitable transfer pricing methods to increase their overall profits as well as their international competitiveness.