The effect of earnings management on tax avoidance with political connections as a moderating variable

Arin Agnesia Thalita, Bambang Hariadi and M Khoiru Rusydi
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Arin Agnesia Thalita: Accounting Department, Faculty of Economics and Business, University of Brawijaya, Malang, Indonesia
Bambang Hariadi: Accounting Department, Faculty of Economics and Business, University of Brawijaya, Malang, Indonesia
M Khoiru Rusydi: Accounting Department, Faculty of Economics and Business, University of Brawijaya, Malang, Indonesia

International Journal of Research in Business and Social Science (2147-4478), 2022, vol. 11, issue 5, 344-353

Abstract: This study aims to determine the effect of earnings management on tax avoidance and the role of political connections in moderating those relationships. The population in this study are manufacturing companies listed on the Indonesia Stock Exchange for the 2016-2020 period. There are 234 samples out of 835 total observations, produced by using purposive sampling. This study was tested by using Multiple Linear Regression Analysis and Moderated Regression Analysis. The results show that earnings management has a significant positive effect on tax avoidance and political connections strengthen the effect of earnings management on tax avoidance. This research used several control variables as well, which are firm size, leverage, profitability, firm value, and firm age, and the results show that profitability has a significant negative effect on tax avoidance, the firm value partially has a significant positive effect on tax avoidance, while firm size, leverage, and firm age have no significant effect on tax avoidance. Key Words:Tax Avoidance, Earnings Management, Political Connections, Firm Size, Leverage, Profitability, Firm Value, Firm Age.

Date: 2022
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