Earnings Management, Corporate Governance and Tax Avoidance: The Case in Indonesia

Lulus Kurniasih ()
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Lulus Kurniasih: Sebelas Maret, Surakarta, Indonesia Author-2-Name: Sulardi Author-2-Workplace-Name: Universitas Sebelas Maret, Surakarta, Indonesia Author-3-Name: Sri Suranta Author-3-Workplace-Name: Universitas Sebelas Maret, Surakarta, Indonesia

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Abstract: Objective � This study aims to determine the effect of earning management and corporate governance mechanisms on corporate tax avoidance. Methodology/Technique � Corporate governance mechanisms use institutional ownership, the size of the board of commissioners, the percentage of independent commissioners, auditing committees, and audit quality as proxies. Meanwhile, earnings management uses the modified Jones model. The sample of this study includes non-financial companies that are listed on the Indonesian Stock Exchange (IDX) between 2014 and 2016. Findings � Corporate tax avoidance can be detected by using the effective tax rate (ETR), which is the ratio of income to tax expenses. This sample was chosen using a purposive sampling method, resulting in 871 firms. The results suggest that earnings management has a significant impact on ETR. Novelty � This study identifies that only independent commissioners and audit quality have a significant influence on ETR.

Keywords: Tax Avoidance; Earnings Management; Corporate Governance; Effective Tax Rate; Audit Quality. (search for similar items in EconPapers)
JEL-codes: G3 G39 (search for similar items in EconPapers)
Pages: 8
Date: 2017-12-02
New Economics Papers: this item is included in nep-acc, nep-cfn and nep-sea
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Published in Journal of Finance and Banking Review, Volume 2, Issue 4

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