Intra-Firm Transactions of TNCs in Ukraine: Empirical Investigation

Modern transnational corporations (TNCs) are integrated, internally deterministic systems characterized by sustainable organizational, production and financial interrelations between their subsidiaries located in different countries. Intra-firm shifting of financial resources within TNCs has become an important means of covering funding needs of particular subsidiaries in a more efficient way and responding to opportunities and threats of the macroeconomic environment. Although the literature on intra-firm transactions of TNCs is already sufficiently developed, most research is either theoretical, or is based on secondary sources of information. There is a lack of relevant research in Ukraine. In contrast, this study is one of a few in the contemporary economic research on intra-firm activities and the second one in Ukraine which is based on empirical information collected from primary sources. The study shows that most TNCs operating in Ukraine decide on financial terms of their intra-firm transactions based on a mixed decision-making system with a centralized system also commonly used. Responsibility over intra-firm operations is largely spread within different units of the group financial function and inside different departments of local subsidiaries. We found significant difference in the use of intra-firm financial instruments depending on the type of control over their Ukrainian subsidiaries. In particular, TNCs use a wider range of intra-firm financial instruments in their relations with subsidiaries with lower degree of control from the parent company than with wholly-owned subsidiaries. We found that tangible or intangible character of core activities of a TNC has an impact on the use of some instruments.