The Impact of Profitability, Firm Size, and Leverage on Tax Avoidance: Moderating Role of Parent Company Location

Zaenal Fahmi and Eduard Ary Binsar Naibaho

Advances in Management and Applied Economics, 2025, vol. 15, issue 3, 2

Abstract: This study examines the effect of profitability, firm size, and leverage on tax avoidance. Additionally, the study investigates the moderating role of parent company location on the relationship between profitability, firm size, leverage, and tax avoidance. Using a sample of 504 observations from companies listed on the Indonesia Stock Exchange, excluding the financial and real estate sectors, and employing multiple linear regression analysis, this study finds that profitability negatively affects tax avoidance, firm size negatively affects tax avoidance, and leverage positively affects tax avoidance. The study also finds that parent company location strengthens the positive relationship between leverage and tax avoidance. The results of this study imply that leverage is a significant factor influencing corporate tax avoidance practices, and this effect is amplified by the presence of parent company location in the relationship between leverage and tax avoidance. Â JEL classification numbers: H25, H26, G32.

Keywords: Profitability; Firm size; Leverage; Tax avoidance; Parent company. (search for similar items in EconPapers)
Date: 2025
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