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

Author

Listed:
  • 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)

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.

Suggested Citation

  • Arin Agnesia Thalita & Bambang Hariadi & M Khoiru Rusydi, 2022. "The effect of earnings management on tax avoidance with political connections as a moderating variable," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 11(5), pages 344-353, July.
    • Handle: RePEc:rbs:ijbrss:v:11:y:2022:i:5:p:344-353
    DOI: 10.20525/ijrbs.v11i5.1864
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    References listed on IDEAS

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    3. Richardson, Grant & Lanis, Roman & Taylor, Grantley, 2015. "Financial distress, outside directors and corporate tax aggressiveness spanning the global financial crisis: An empirical analysis," Journal of Banking & Finance, Elsevier, vol. 52(C), pages 112-129.
    4. Benjamin C. Ayers & John (Xuefeng) Jiang & Stacie K. Laplante, 2009. "Taxable Income as a Performance Measure: The Effects of Tax Planning and Earnings Quality," Contemporary Accounting Research, John Wiley & Sons, vol. 26(1), pages 15-54, March.
    5. Chansog (Francis) Kim & Liandong Zhang, 2016. "Corporate Political Connections and Tax Aggressiveness," Contemporary Accounting Research, John Wiley & Sons, vol. 33(1), pages 78-114, March.
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