Effect of Profit Repatriation Practices on Performance of Multinational Corporations Listed on Nairobi Securities Exchange Market Kenya

Abstract

Developing countries grapple with the problem of profit repartriation due to lienient transfer pricing policies, illicit outflows in subsaharan africa have grown form $12.1 billion to $ 68.6 billion between 2003 and 2012, whereas developing economies have lost $ 6,6 trillion over the same period.Despite enactment of tighter regulation especially on transfer.pricing Multinational corporations (MNCs) have continued to engage in the illicit practices. On other hand Multinationalcorporations (MNCs) have not been perforning at an optimal capacity as depicted in their profits and return on investments. There is mixed literature and results on profit repartriationpractices on MNCs. Therefore, the study sought to assess the influence of profit repartriationpractices on performance of Multinational Corporation listed on Nairobi Securities Exchangein Kenya.specifically the study sought establish the role of, transfer pricing, royalty payment, interest payments and re-invoicing on MNCs performance. The study had transfer pricing, royalty payment, interest payments and re-invoicing as independent variables and peromanceas the dependent variables. The study was anchored on Keynesian and Signalling effect theory.Descriptive research design was adopted. The population was 23 MNCS listed on the securitiesexachange and a sample of 20 companies was purposively selected. interest in the study consited all the MNCs quoted in the NSE. The study thus picked 23 MNCs. Data was collected using semi structured questionnaires and personal interview. Data analysis was done through descpritve stastics and inferential startistic was thriugh pearsons correlation. The research found that there a signifact relationship between the independent variables and dependentwhere interest on loans with an r= 0.81, royalty payments r=O.5685, transfer pricing r= 0.4637 and re-invoicing r= 0.4957. The study noted that profit repatriation by MNCs leads to their poor perfomance with negative effects to the host country.The study recomends for tougher rules by the host countries to minimise profit repatriationand ensure there is a correct reporting system by MNCs to maximize the benefits. The study would go along way in improving on policyformulationand implementation and for academicians an avenue for further study.