| This research attempts to identify factors influencing the selection of a transfer price method, and to determine the relationship between certain characteristics of the transfer pricing system and the satisfaction of subordinate managers with the system. Two types of questionnaires were mailed to the corporations comprising the FORTUNE 500. One was sent to corporate controllers to obtain information about selection of a transfer pricing method. The other was completed by profit center managers, to provide information about managers' satisfaction with the transfer pricing system.;The transfer pricing system was found to be of surprisingly low importance to managers' overall job satisfaction. However, satisfaction with the transfer pricing system was significantly lower than satisfaction with other job dimensions. Managers are more satisfied with the system where market-based methods are used. Managers of supplying (only) profit centers had higher satisfaction scores than did managers of using (only) or (both) supplying and using profit centers. The proportion of goods transferred internally, proportion of managers' compensation in the form of profit-based bonus, and profit center managers' authority varied in complicated ways in their relationship to managers' satisfaction with the transfer pricing system. All three of these relationships varied with the transfer pricing method and type of profit center (though the interaction effects were statistically insignificant.).;No evidence was found to support the hypothesis that organizations' selection of transfer pricing methods are related to their objectives for the transfer pricing system. Seven other factors were found to be of little or no importance in the selection of a transfer pricing method, though each factor was of strong or decisive importance for at least a few firms. |
