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

Dica Lady Silvera; Achmad Hizazi; M. Syurya Hidayat; Sri Rahayu

doi:http://dx.doi.org/10.21511/imfi.19(1).2022.21

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

Received February 10, 2022;

Accepted March 20, 2022;

Published March 22, 2022
Author(s)

Link to ORCID Index: https://orcid.org/0000-0003-0594-6391

Dica Lady Silvera
,

Link to ORCID Index: https://orcid.org/0000-0002-3470-4888

Achmad Hizazi
,

Link to ORCID Index: https://orcid.org/0000-0002-9279-325X

M. Syurya Hidayat
,

Link to ORCID Index: https://orcid.org/0000-0002-9508-378X

Sri Rahayu
DOI
http://dx.doi.org/10.21511/imfi.19(1).2022.21
Article Info
Volume 19 2022, Issue #1, pp. 274-286
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This work is licensed under a Creative Commons Attribution 4.0 International License

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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Keywords
corporate governance, corporate social responsibility, financial constraint, foreign activity, political connection, tax avoidance
JEL Classification (Paper profile tab)
G30, H26, M41
References
90
Tables
5
Figures
0

- 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

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- 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

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