The influence of foreign ownership and debt covenant on transfer pricing: A study of corporate governance

The business world is developing very rapidly in countries. Transfer pricing (TP) is vital in multinational companies (Kumar et al., 2021). This study analyzes the influence of foreign ownership (FO) and debt covenants on TP with multinationality as a moderating variable. The research population is manufacturing companies listed on the Indonesia Stock Exchange (IDX). The sample used the purposive sampling method. This study uses the partial least squares structural equation modeling (PLS-SEM) method to test the research hypotheses. The results prove that FO does not affect TP and debt covenants have a significant positive effect on TP. Furthermore, multinationality can moderate by weakening the impact of debt covenants on TP. The novelty of this research gives new insight into corporate governance using multinationality as a moderating variable on the relationship between debt covenant, FO, and TP. Further research, may investigate the influence of environmental, social, and governance factors on TP. The study has implications for policymakers to establish clear regulations to ensure transparency and to prevent tax avoidance practices. Therefore, company management should pay more attention to the debt ratio. Then, investors have to consider how companies deal with tax risk.