Financial constraints and corporate governance as moderating variables for the determinants of tax avoidance

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The purpose of this study is to empirically investigate the effect of financial constraints and corporate governance as moderating variables on the determinants of tax avoidance, which includes foreign activity, corporate social responsibility, and political connections. All companies listed on the Indonesia Stock Exchange from 2017 to 2019 are the objects of this study. The panel data regression was used to address the research question. The findings show that foreign activity, corporate social responsibility, and political connections significantly affected tax avoidance with alpha 5%. The results also show that corporate governance can reduce the positive impact of foreign activity, corporate social responsibility, and political connection on tax avoidance with alpha 1%.
Moreover, financial constraints may strengthen the positive impact of corporate social responsibility on tax avoidance with alpha 5%. The findings further provide empirical evidence about one of the strategies businesses use to conduct tax avoidance, notably foreign activity, corporate social responsibility, and political connection. Thus, companies that implement good corporate governance could reduce corporate tax avoidance acts, which can harm the company’s image and lead to a decrease in company value. This study discovered a new proxy for measuring financial constraints, as well as developments in the political connection.

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    • Table 1. Regression results for Model 1
    • Table 2. Regression results for Model 2
    • Table A1. Companies with political connections
    • Table B1. Financial constraint score
    • Table C1. Descriptive statistics
    • Data curation
      Dica Lady Silvera
    • Funding acquisition
      Dica Lady Silvera
    • Project administration
      Dica Lady Silvera
    • Software
      Dica Lady Silvera
    • Visualization
      Dica Lady Silvera
    • Writing – original draft
      Dica Lady Silvera
    • Investigation
      Dica Lady Silvera
    • Conceptualization
      Achmad Hizazi
    • Methodology
      Achmad Hizazi, M. Syurya Hidayat
    • Resources
      Achmad Hizazi, M. Syurya Hidayat, Sri Rahayu
    • Supervision
      Achmad Hizazi, Sri Rahayu
    • Validation
      Achmad Hizazi, M. Syurya Hidayat
    • Formal Analysis
      M. Syurya Hidayat, Sri Rahayu
    • Writing – review & editing
      Sri Rahayu