Transfer Pricing and Organizational Performance of Multinational Corporations in Nigeria: A Mediating Effect of Audit Quality

Abstract

Aim: The relationship between the enforcement of transfer transaction prices and organisational success is getting more complex. Hence, the primary aim of this study is to examine the effects of transfer pricing on the financial performance of Nigerian-listed multinational companies (MNCs), while also considering the potential moderating effect of audit quality. Methodology: The research design used for this study was ex post facto. The study used a sample of 10 Multinational Corporations that were listed on the Nigeria stock market as of December 2023. The research used panel regression analysis to investigate the influence of transfer price on the overall performance of multinational companies (MNCs), with a particular focus on the mediating effect of audit quality. Findings: The research found that, when taking into account the effect of audit quality, the exchange rate has a positive influence on the financial performance of multinational firms, as measured by return on assets (ROA). Furthermore, the analysis of the impact of audit quality on effective tax rates demonstrates a statistically significant negative relationship with the financial success of multinational corporations, as assessed by return on assets (ROA). Conclusion: The performance of multinational corporations in Nigeria is highly influenced by transfer pricing, especially when considering factors such as exchange rate and effective tax rate, which are regulated by audit quality. Recommendation: It is recommended that multinational corporations undertake appropriate measures to enhance their effective tax rate in order to enhance performance and mitigate expensive errors via the implementation of high-quality audits in the context of transaction transfer pricing rules.