TP Qube

CASE STUDY

Foreign comparables framework with country risk modelling

Client: TPED research collaboration
Issue: Domestic comparable company data can be scarce in certain geographies, making standard TNMM benchmark approaches difficult to apply.
Why it worked

TP qube contributed statistical modelling to a TPED research paper on foreign comparable company selection and adjustment. The work focused on whether country risk could provide a more robust selection criterion when local comparable company data is limited.

The analysis tested the relationship between profitability and country-specific risks for independent companies in the food processing sector. The results supported the practical use of foreign comparable companies from countries with similar risk profiles, rather than rejecting them solely because they are outside the tested party's region.

The final research was published and helped translate an empirical observation into a structured benchmark framework for data-scarce markets.

Read the blog article
Empirical Findings
1

Country risk, proxied by sovereign ratings, showed a statistically significant relationship with profitability in the food processing sample.

2

Regional proximity appeared less decisive than country risk similarity when domestic comparable companies were scarce.

Benchmark Framework
1Use domestic comparable companies where sufficient reliable data exists.
2If domestic data is insufficient, use a regional panel from countries with similar risk levels.
3If the regional panel is insufficient, use companies outside the tested party's region with a similar country risk profile.
4If needed, include countries with different risk levels and apply a country risk adjustment.
Outputs
A practical framework for selecting and adjusting foreign comparable companies in data-scarce geographies
Published Research