Factors of Credit Ratings for Transfer Pricing of Loans in European Conditions
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Date
2024-10-10
Authors
Boďa, Martin
Brychta, Karel
Ištok, Michal
Solilová, Veronika
ORCID
0000-0002-9184-1598Advisor
Referee
Mark
Journal Title
Journal ISSN
Volume Title
Publisher
Prague Univ Economics and Business
Altmetrics
Abstract
In accord with international transfer pricing regulations, the borrower's creditworthiness is the main factor to be reflected in valuation of cross-border loan transactions between associated enterprises. However, trouble invariably arises for small and medium-sized enterprises that do not have an assigned credit rating. The aim of this paper is to determine the most reliable predictors of a company's credit rating for European entities facing missing rating coverage for the purpose of transfer pricing. Based on 2015-2019 data sourced from the Orbis database, the study examines key financial ratios and non-financial information that could be instrumental in reconstructing a long-term rating category of a company assigned by Moody's Investors Service. The results identify interest coverage as the most useful predictor. Therefore, a law-approved and taxcredit rating) should preferably exploit interest coverage as a link to the otherwise missing ratings.
Description
Citation
POLITICKA EKONOMIE. 2024, vol. 72, issue 5, p. 727-751.
https://polek.vse.cz/artkey/pol-202405-0001_factors-of-credit-ratings-for-transfer-pricing-of-loans-in-european-conditions.php
https://polek.vse.cz/artkey/pol-202405-0001_factors-of-credit-ratings-for-transfer-pricing-of-loans-in-european-conditions.php
Document type
Peer-reviewed
Document version
Published version
Date of access to the full text
Language of document
en
Study field
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Date of acceptance
Defence
Result of defence
Document licence
Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International
http://creativecommons.org/licenses/by-nc-nd/4.0/
http://creativecommons.org/licenses/by-nc-nd/4.0/