The mediating role of financial reporting aggressiveness in corporate tax avoidance strategies
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DOIhttp://dx.doi.org/10.21511/imfi.21(4).2024.18
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Article InfoVolume 21 2024, Issue #4, pp. 226-238
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Tax avoidance, often driven by managerial discretion, remains a critical issue in corporate governance due to its implications for financial transparency and regulatory compliance. This study investigates how Transfer Pricing, Thin Capitalization, Leverage, and CSR Disclosure – strategies employed by managers – affect Tax Avoidance and examines the mediating role of Financial Reporting Aggressiveness. Grounded in agency theory, the study analyzes data from 20 firms listed on the Indonesian Stock Exchange from 2019 to 2023 using PLS-SEM. The findings reveal that Transfer Pricing (β = 0.062, p = 0.002), Leverage (β = 0.046, p < 0.001), and CSR Disclosure (β = 0.061, p < 0.001) significantly increase Tax Avoidance, with Financial Reporting Aggressiveness acting as a mediator. However, Thin Capitalization does not significantly influence Tax Avoidance (β = 0.028, p = 0.422). These results suggest that managers exploit these mechanisms to minimize tax burdens, often at the cost of long-term shareholder interests. The study calls for stronger corporate governance and stricter oversight of CSR reporting and financial transparency to mitigate such practices.
- Keywords
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JEL Classification (Paper profile tab)H26, M41, G32, M14, G38
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References36
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Tables6
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Figures1
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- Figure 1. PLS-SEM analysis
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- Table 1. Operational definition and measurement of variables
- Table 2. Descriptive statistics
- Table 3. Measurement model results
- Table 4. Model fit indices
- Table 5. Path coefficients and p-values
- Table 6. Mediation effect results
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