The mediating role of financial reporting aggressiveness in corporate tax avoidance strategies
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Author(s)Andi KusumawatiLink to ORCID Index: https://orcid.org/0009-0004-7270-3714
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Chamdun MahmudiLink to ORCID Index: https://orcid.org/0000-0002-6747-9373
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Suhanda SuhandaLink to ORCID Index: https://orcid.org/0000-0002-0248-6943
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Andi Iqra Pradipta NatsirLink to ORCID Index: https://orcid.org/0009-0008-8539-0795
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Fakhrul Indra HermansyahLink to ORCID Index: https://orcid.org/0009-0000-6246-2954
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Muhammad Try DharsanaLink to ORCID Index: https://orcid.org/0009-0003-1947-8274
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Rianda Ridho Hafizh ThahaLink to ORCID Index: https://orcid.org/0000-0002-7150-2732
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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
- 97 Views
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25 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
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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Determinants of financing decision: empirical evidence on manufacturing firms in Indonesia
Sutomo Sutomo , Sugeng Wahyudi ,
Irene Rini Demi Pangestuti ,
Harjum Muharam
doi: http://dx.doi.org/10.21511/imfi.16(2).2019.14
Investment Management and Financial Innovations Volume 16, 2019 Issue #2 pp. 159-170 Views: 2386 Downloads: 333 TO CITE АНОТАЦІЯThis study aims to contribute to the emergence of the literature focusing on exploring the factors influencing the financing decision, as well as examining the relationship between the firm size, profitability and firm growth towards the corporate debt. Questions such as how relevant firm size, profitability and firm growth to debt are, quantitatively, had not been fully answered in the business literature. The purpose of this study is to fill this large gap by examining the role of the firm size, profitability, investment and firm growth for the corporate debt. This study tries to examine the determinants of debt in the financial literature which include size, growth, business risk, and profitability in accordance with the capital structure theory, in manufacturing firms in Indonesia. The sample contained financial data from 150 firms for the period 2012–2017. The results showed that the manufacturing firms in Indonesia had high debt levels, especially the size, profitability, firm growth and profitability had proven to be the debt determinants, which also confirmed the Pecking Order Theory. This study also found that the management preference of manufacturing firms in Indonesia for risk was the risk-seeker or risk-neutral ones. This finding implies that the choice of funding sources originating from debt still provided greater returns compared to the capital cost needed due to business uncertainties.
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The impact of Working Capital Management on shareholders’ wealth and profitability: evidence from Colombo Stock Exchange
Wasantha Perera ,
Pradeep Priyashantha
doi: http://dx.doi.org/10.21511/imfi.15(2).2018.10
Investment Management and Financial Innovations Volume 15, 2018 Issue #2 pp. 104-115 Views: 2311 Downloads: 479 TO CITE АНОТАЦІЯThe Working Capital Management (WCM) has an important role for the firm’s success or failure, because it directly affects the overall business health of the firm. This study examined the impact of WCM on profitability and shareholders’ wealth using 50 companies listed in different sectors on the Colombo Stock Exchange (CSE) for the period from 2010 to 2015. This sample represents 47% of the selected sectors of CSE. The profitability of the company is measured using gross operating profit (GOP) and shareholders wealth measured by Tobin’s Q (TQ) ratio. The WCM is measured using five independent variables namely stock holding period (SHP), debtors’ collection period (DCP), creditors’ settlement period (CSP), cash conversion circle (CCC) and current assets ratio (CAR). Further, three additional variables such as firm size (SIZE), leverage (LEV) and earning yield (EY) are employed as controlling variables to capture the impact of other performance of the companies.
The data were analyzed using ordinary least square (OLS) and panel data regression models. These regression models reveal that there is a significant negative relationship between CCC and dependent variables (GOP & TQ). Further, this relationship has been confirmed by the major components of CCC such as SHP, DCP. Firm size also positively and significantly effects on the firm GOP while negatively effects on the TQ. Further, they revealed that there is a significant positive relationship between LEV and TQ. The study finds that the shareholders’ wealth and profitability can be increased through the efficiency of WCM. -
Corporate governance quality, firm size and earnings management: empirical study in Indonesia Stock Exchange
Yulia Saftiana , Mukhtaruddin ,
Krisna Winda Putri ,
Ika Sasti Ferina
doi: http://dx.doi.org/10.21511/imfi.14(4).2017.10
Investment Management and Financial Innovations Volume 14, 2017 Issue #4 pp. 105-120 Views: 1980 Downloads: 530 TO CITE АНОТАЦІЯEarnings management (EM) is manipulation done by management in preparing financial statement in order to gain management advantages or to increase the firm value. EM can reduce the quality of financial statements because it does not show the real earning periodical. This research aims to identify the effect of good corporate governance (GCG) (institutional ownership, managerial ownership, frequency of board meetings, frequency of audit committee (AC) meetings), firm size, and leverage on the EM. Population comprises the companies in LQ 45 index of Iindonesia Stock Exchange (IDX) for the period 2010–2014. Samples of the research were taken using purposive sampling method, and the variables are tested using multiple linear regression analysis. The results of the research show that partially, only leverage has significant effect on EM, while institutional ownership, managerial ownership, frequency of board meeting, frequency of AC meetings, and firm size have no significant effect on EM, but all of the variables have simultaneously significant effect on EM. Limitations of the research are the only used 6 independent variables and 21 companies as samples of the research.
