Publication detail

Factors of Credit Ratings for Transfer Pricing of Loans in European Conditions

BOĎA, M. BRYCHTA, K. SOLILOVÁ, V. IŠTOK, M.

Original Title

Factors of Credit Ratings for Transfer Pricing of Loans in European Conditions

Type

journal article in Web of Science

Language

English

Original 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.

Keywords

Transfer pricing; credit ratings; predictors of creditworthiness; interest coverage; European companies

Authors

BOĎA, M.; BRYCHTA, K.; SOLILOVÁ, V.; IŠTOK, M.

Released

10. 10. 2024

Publisher

Prague Univ Economics and Business

Location

PRAGUE 3

ISBN

2336-8225

Periodical

POLITICKA EKONOMIE

Year of study

72

Number

5

State

Czech Republic

Pages from

727

Pages to

751

Pages count

25

URL

https://polek.vse.cz/artkey/pol-202405-0001_factors-of-credit-ratings-for-transfer-pricing-of-loans-in-european-conditions.php

Full text in the Digital Library

http://hdl.handle.net/11012/250752

BibTex

@article{BUT193864,
  author="Martin {Boďa} and Karel {Brychta} and Michal {Ištok} and Veronika {Solilová}",
  title="Factors of Credit Ratings for Transfer Pricing of Loans in European Conditions",
  journal="POLITICKA EKONOMIE",
  year="2024",
  volume="72",
  number="5",
  pages="727--751",
  doi="10.18267/j.polek.1421",
  issn="2336-8225",
  url="https://polek.vse.cz/artkey/pol-202405-0001_factors-of-credit-ratings-for-transfer-pricing-of-loans-in-european-conditions.php"
}

Responsibility: Ing. Marek Strakoš