Main Article Content
Abstract
The purpose of this study is to analyze the effect of director experience and management compensation on tax avoidance in Indonesia. This is quantitative research with secondary data sources using cross section data. Purposive sampling was used to obtain 267 observation samples of manufacturing companies listed on the Indonesia Stock Exchange from 2018 to 2020 tested using multiple linear regression analysis. Dependent variable of tax avoidance proxied by cash effective tax rate is used. The director’s experience and management compensation are independent variables in this study. The director’s experience is measured by using the dummy variable of the director’s experience during study or work abroad. Management compensation is proxied by using the natural logarithm of the annual compensation received by management. Some control variables are also used such as firm size, leverage, firm age, return on assets, growth, market to book ratio, and debt to equity ratio. We found that there is a significant negative relationship between director's experience and management's compensation on tax avoidance. In conclusion, director's experience and management compensation are both important for tax avoidance decisions in companies.
Article Details
Copyright (c) 2022 Sri - Asih, Doddy Setiawan
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
Authors who publish with this journal agree to the following terms:
- Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this journal.
- Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgment of its initial publication in this journal.
- Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Effect of Open Access).
References
- Amri, M. (2017). Pengaruh Kompensasi Manajemen Terhadap Penghindaran Pajak Dengan Moderasi Diversifikasi Gender Direksi Dan Preferensi Risiko Eksekutif Perusahaan Di Indonesia. Jurnal Akuntansi Riset, 9(1), 1. https://doi.org/10.17509/jaset.v9i1.5253
- Armstrong, C. S., Blouin, J. L., Jagolinzer, A. D., & Larcker, D. F. (2015). Corporate governance, incentives, and tax avoidance. Journal of Accounting and Economics, 60(1), 1–17. https://doi.org/10.1016/j.jacceco.2015.02.003
- Armstrong, C. S., Blouin, J. L., & Larcker, D. F. (2012). The incentives for tax planning. Journal of Accounting and Economics, 53(1–2), 391–411. https://doi.org/10.1016/j.jacceco.2011.04.001
- Austin, C. R., & Wilson, R. J. (2017). An examination of reputational costs and tax avoidance: Evidence from firms with valuable consumer brands. The Journal of the American Taxation Association, 39(1), 67–93.
- Bimo, I. D., Prasetyo, C. Y., & Susilandari, C. A. (2019). The effect of internal control on tax avoidance: the case of Indonesia. Journal of Economics and Development, 21(2), 131–143. https://doi.org/10.1108/jed-10-2019-0042
- Bloom, N., & Van Reenen, J. (2007). Measuring and explaining management practices across firms and countries. The Quarterly Journal of Economics, 122(4), 1351–1408.
- Budiadnyani, N. P. (2020). Pengaruh Kompensasi Manajemen Pada Penghindaran Pajak Dengan Kepemilikan Instutisional Sebagai Variabel Pemoderasi. Jurnal Ilmiah Akuntansi Dan Bisnis, 5(1), 67–90.
- Carpenter, M. A., Geletkancz, M. A., & Sanders, W. G. (2004). Upper echelons research revisited: Antecedents, elements, and consequences of top management team composition. Journal of Management, 30(6), 749–778. https://doi.org/10.1016/j.jm.2004.06.001
- Chen, S., Chen, X., Cheng, Q., & Shevlin, T. (2010). Are family firms more tax aggressive than non-family firms? Journal of Financial Economics, 95(1), 41–61. https://doi.org/10.1016/j.jfineco.2009.02.003
- CNBC. (2021, June 28). Ngakalin Pajak, Sri Mulyani: Banyak Perusahaan NgakuRugi! CNBC Indonesia. https://www.cnbcindonesia.com/news/20210628145339-4-256506/ngakalin-pajak-sri-mulyani-banyak-perusahaan-ngaku-rugi
- Desai, M. A., & Dharmapala, D. (2006). Corporate tax avoidance and high-powered incentives. Journal of Financial Economics, 79(1), 145–179. https://doi.org/10.1016/j.jfineco.2005.02.002
- detikfinance. (2020, September 25). Kasus Sengketa Pajak Apple Rp 224 T di Eropa Lanjut ke Pengadilan Tinggi. Detik.Com. https://doi.org/https://finance.detik.com/berita-ekonomi-bisnis/d-5188668/kasus-sengketa-pajak-apple-rp-224-t-di-eropa-lanjut-ke-pengadilan-tinggi/1
- Dyreng, S. D., Hanlon, M., & Maydew, E. L. (2010). The effects of executives on corporate tax avoidance. Accounting Review, 85(4), 1163–1189. https://doi.org/10.2308/accr.2010.85.4.1163
- Erle, B. (2008). Tax Risk Management and Board Responsibility. In W. Schön (Ed.), Tax and Corporate Governance. MPI Studies on Intellectual Property, Competition and Tax Law (pp. 205–220). Springer.
- Fama;, E. F., & Jensen, M. C. (1983). Separation of ownership and control. Journal OfLaw and Economics, 26(2), 301–325. https://doi.org/10.1086/467037
- Fama, E. F., & Jensen, M. C. (1983). Agency problems and residual claims. The Journal of Law & Economics, 26(2), 327–349.
- Giannetti, M., Liao, G., & Yu, X. (2015). The brain gain of corporate boards: Evidence from China. Journal of Finance, 70(4), 1629–1682. https://doi.org/10.1111/jofi.12198
- Halioui, K., Neifar, S., & Abdelaziz, F. Ben. (2016). Corporate governance, CEO compensation and tax aggressiveness: Evidence from American firms listed on the NASDAQ 100. Review of Accounting and Finance, 15(4), 445–462. https://doi.org/10.1108/RAF-01-2015-0018
- Hambrick, D. C. (2007). Upper echelons theory: An update. Academy of Management Review, 32(2), 334–343. https://doi.org/10.5465/AMR.2007.24345254
- Hambrick, D. C., & Mason, P. A. (1986). Upper Echelons : The organization as a reflection of its top managers. Academy of Management Review, 9(2), 193–206.
- Huseynov, F., Sardarli, S., & Zhang, W. (2017). Does index addition affect corporate tax avoidance? Journal of Corporate Finance, 43, 241–259. https://doi.org/10.1016/j.jcorpfin.2017.01.008
- Idzniah, U. N. L., & Bernawati, Y. (2020). Board of Directors, Audit Committee, Executive Compensation and Tax Avoidance of Banking Companies in Indonesia. Journal of Accounting and Strategic Finance, 3(2), 199–213. https://doi.org/10.33005/jasf.v3i2.111
- Jiang, F., & Kim, K. A. (2015). Corporate governance in China: A modern perspective. Journal of Corporate Finance, 32, 190–216. https://doi.org/10.1016/j.jcorpfin.2014.10.010
- Kovermann, J., & Velte, P. (2019). The impact of corporate governance on corporate tax avoidance—A literature review. Journal of International Accounting, Auditing and Taxation, 36, 100270. https://doi.org/10.1016/j.intaccaudtax.2019.100270
- Kuswiratmo, B. A. (2016). Keuntungan & Risiko Menjadi Direktur, Komisaris, dan Pemegang Saham. Visimedia.
- Lanis, R., & Richardson, G. (2011). The effect of board of director composition on corporate tax aggressiveness. Journal of Accounting and Public Policy, 30(1), 50–70. https://doi.org/10.1016/j.jaccpubpol.2010.09.003
- Maisaroh, S., & Setiawan, D. (2021). Kepemilikan Saham Asing, Dewan Komisaris Asing dan Direksi Asing Terhadap Penghindaran Pajak di Indonesia. Jurnal Akuntansi Dan Bisnis, 21(1), 29–42.
- McGill, G. A., & Outslay, E. (2004). Lost in translation: Detecting tax shelter activity in financial statements. National Tax Journal, 57(3), 739–756.
- Minnick, K., & Noga, T. (2010). Do corporate governance characteristics influence tax management? Journal of Corporate Finance, 16(5), 703–718. https://doi.org/10.1016/j.jcorpfin.2010.08.005
- Nielsen, S. (2010). Top management team diversity: A review of theories and methodologies. International Journal of Management Reviews, 12(3), 301–316. https://doi.org/10.1111/j.1468-2370.2009.00263.x
- Nugroho, R., & Rosidy, D. (2019). Pengaruh independen dan kompensasi eksekutif terhadap agresivitas pajak. Info Artha, 3(1), 55–65. https://doi.org/10.31092/jia.v3i1.563
- Panda, B., & Leepsa, N. M. (2017). Agency theory: Review of theory and evidence on problems and perspectives. Indian Journal of Corporate Governance, 10(1), 74–95. https://doi.org/10.1177/0974686217701467
- Phillips, J. D. (2003). Corporate tax-planning effectiveness: The role of compensation-based incentives. The Accounting Review, 78(3), 847–874.
- Rego, S. O., & Wilson, R. (2012). Equity risk incentives and corporate tax aggressiveness. Journal of Accounting Research, 50(3), 775–810. https://doi.org/10.1111/j.1475-679X.2012.00438.x
- Richardson, G., Taylor, G., & Lanis, R. (2016). Women on the board of directors and corporate tax aggressiveness in Australia An empirical analysis. Accounting Research Journal, 29(3), 313–331. https://doi.org/10.1108/ARJ-09-2014-0079
- Seidman, J. K., & Stomberg, B. (2017). Equity compensation and tax avoidance: Disentangling managerial incentives from tax benefits and reexamining the effect of shareholder rights. The Journal of the American Taxation Association, 39(2), 21–41.
- Sumunar, K. I., Jannah, L., & Aulia, D. (2019). CEO overconfidence, tax avoidance, and education foundation. Jurnal Akuntansi & Auditing Indonesia, 23(2), 99–105. https://doi.org/10.20885/jaai.vol23.iss2.art4
- Syverson, C. (2011). What determines productivity. Journal of Economic Literature, 49(2), 326–365. https://doi.org/10.1257/jel.49.2.326
- Wen, W., Cui, H., & Ke, Y. (2020). Directors with foreign experience and corporate tax avoidance. Journal of Corporate Finance, 62, 101624. https://doi.org/10.1016/j.jcorpfin.2020.101624
- Yuan, R., & Wen, W. (2018). Managerial foreign experience and corporate innovation. Journal of Corporate Finance, 48, 752–770. https://doi.org/10.1016/j.jcorpfin.2017.12.015
- Zulma, G. W. M. (2016). Family ownership, management compensation, and tax avoidance: Evidence from Indonesia. The Indonesian Journal of Accounting Research, 19(1), 97–110.
References
Amri, M. (2017). Pengaruh Kompensasi Manajemen Terhadap Penghindaran Pajak Dengan Moderasi Diversifikasi Gender Direksi Dan Preferensi Risiko Eksekutif Perusahaan Di Indonesia. Jurnal Akuntansi Riset, 9(1), 1. https://doi.org/10.17509/jaset.v9i1.5253
Armstrong, C. S., Blouin, J. L., Jagolinzer, A. D., & Larcker, D. F. (2015). Corporate governance, incentives, and tax avoidance. Journal of Accounting and Economics, 60(1), 1–17. https://doi.org/10.1016/j.jacceco.2015.02.003
Armstrong, C. S., Blouin, J. L., & Larcker, D. F. (2012). The incentives for tax planning. Journal of Accounting and Economics, 53(1–2), 391–411. https://doi.org/10.1016/j.jacceco.2011.04.001
Austin, C. R., & Wilson, R. J. (2017). An examination of reputational costs and tax avoidance: Evidence from firms with valuable consumer brands. The Journal of the American Taxation Association, 39(1), 67–93.
Bimo, I. D., Prasetyo, C. Y., & Susilandari, C. A. (2019). The effect of internal control on tax avoidance: the case of Indonesia. Journal of Economics and Development, 21(2), 131–143. https://doi.org/10.1108/jed-10-2019-0042
Bloom, N., & Van Reenen, J. (2007). Measuring and explaining management practices across firms and countries. The Quarterly Journal of Economics, 122(4), 1351–1408.
Budiadnyani, N. P. (2020). Pengaruh Kompensasi Manajemen Pada Penghindaran Pajak Dengan Kepemilikan Instutisional Sebagai Variabel Pemoderasi. Jurnal Ilmiah Akuntansi Dan Bisnis, 5(1), 67–90.
Carpenter, M. A., Geletkancz, M. A., & Sanders, W. G. (2004). Upper echelons research revisited: Antecedents, elements, and consequences of top management team composition. Journal of Management, 30(6), 749–778. https://doi.org/10.1016/j.jm.2004.06.001
Chen, S., Chen, X., Cheng, Q., & Shevlin, T. (2010). Are family firms more tax aggressive than non-family firms? Journal of Financial Economics, 95(1), 41–61. https://doi.org/10.1016/j.jfineco.2009.02.003
CNBC. (2021, June 28). Ngakalin Pajak, Sri Mulyani: Banyak Perusahaan NgakuRugi! CNBC Indonesia. https://www.cnbcindonesia.com/news/20210628145339-4-256506/ngakalin-pajak-sri-mulyani-banyak-perusahaan-ngaku-rugi
Desai, M. A., & Dharmapala, D. (2006). Corporate tax avoidance and high-powered incentives. Journal of Financial Economics, 79(1), 145–179. https://doi.org/10.1016/j.jfineco.2005.02.002
detikfinance. (2020, September 25). Kasus Sengketa Pajak Apple Rp 224 T di Eropa Lanjut ke Pengadilan Tinggi. Detik.Com. https://doi.org/https://finance.detik.com/berita-ekonomi-bisnis/d-5188668/kasus-sengketa-pajak-apple-rp-224-t-di-eropa-lanjut-ke-pengadilan-tinggi/1
Dyreng, S. D., Hanlon, M., & Maydew, E. L. (2010). The effects of executives on corporate tax avoidance. Accounting Review, 85(4), 1163–1189. https://doi.org/10.2308/accr.2010.85.4.1163
Erle, B. (2008). Tax Risk Management and Board Responsibility. In W. Schön (Ed.), Tax and Corporate Governance. MPI Studies on Intellectual Property, Competition and Tax Law (pp. 205–220). Springer.
Fama;, E. F., & Jensen, M. C. (1983). Separation of ownership and control. Journal OfLaw and Economics, 26(2), 301–325. https://doi.org/10.1086/467037
Fama, E. F., & Jensen, M. C. (1983). Agency problems and residual claims. The Journal of Law & Economics, 26(2), 327–349.
Giannetti, M., Liao, G., & Yu, X. (2015). The brain gain of corporate boards: Evidence from China. Journal of Finance, 70(4), 1629–1682. https://doi.org/10.1111/jofi.12198
Halioui, K., Neifar, S., & Abdelaziz, F. Ben. (2016). Corporate governance, CEO compensation and tax aggressiveness: Evidence from American firms listed on the NASDAQ 100. Review of Accounting and Finance, 15(4), 445–462. https://doi.org/10.1108/RAF-01-2015-0018
Hambrick, D. C. (2007). Upper echelons theory: An update. Academy of Management Review, 32(2), 334–343. https://doi.org/10.5465/AMR.2007.24345254
Hambrick, D. C., & Mason, P. A. (1986). Upper Echelons : The organization as a reflection of its top managers. Academy of Management Review, 9(2), 193–206.
Huseynov, F., Sardarli, S., & Zhang, W. (2017). Does index addition affect corporate tax avoidance? Journal of Corporate Finance, 43, 241–259. https://doi.org/10.1016/j.jcorpfin.2017.01.008
Idzniah, U. N. L., & Bernawati, Y. (2020). Board of Directors, Audit Committee, Executive Compensation and Tax Avoidance of Banking Companies in Indonesia. Journal of Accounting and Strategic Finance, 3(2), 199–213. https://doi.org/10.33005/jasf.v3i2.111
Jiang, F., & Kim, K. A. (2015). Corporate governance in China: A modern perspective. Journal of Corporate Finance, 32, 190–216. https://doi.org/10.1016/j.jcorpfin.2014.10.010
Kovermann, J., & Velte, P. (2019). The impact of corporate governance on corporate tax avoidance—A literature review. Journal of International Accounting, Auditing and Taxation, 36, 100270. https://doi.org/10.1016/j.intaccaudtax.2019.100270
Kuswiratmo, B. A. (2016). Keuntungan & Risiko Menjadi Direktur, Komisaris, dan Pemegang Saham. Visimedia.
Lanis, R., & Richardson, G. (2011). The effect of board of director composition on corporate tax aggressiveness. Journal of Accounting and Public Policy, 30(1), 50–70. https://doi.org/10.1016/j.jaccpubpol.2010.09.003
Maisaroh, S., & Setiawan, D. (2021). Kepemilikan Saham Asing, Dewan Komisaris Asing dan Direksi Asing Terhadap Penghindaran Pajak di Indonesia. Jurnal Akuntansi Dan Bisnis, 21(1), 29–42.
McGill, G. A., & Outslay, E. (2004). Lost in translation: Detecting tax shelter activity in financial statements. National Tax Journal, 57(3), 739–756.
Minnick, K., & Noga, T. (2010). Do corporate governance characteristics influence tax management? Journal of Corporate Finance, 16(5), 703–718. https://doi.org/10.1016/j.jcorpfin.2010.08.005
Nielsen, S. (2010). Top management team diversity: A review of theories and methodologies. International Journal of Management Reviews, 12(3), 301–316. https://doi.org/10.1111/j.1468-2370.2009.00263.x
Nugroho, R., & Rosidy, D. (2019). Pengaruh independen dan kompensasi eksekutif terhadap agresivitas pajak. Info Artha, 3(1), 55–65. https://doi.org/10.31092/jia.v3i1.563
Panda, B., & Leepsa, N. M. (2017). Agency theory: Review of theory and evidence on problems and perspectives. Indian Journal of Corporate Governance, 10(1), 74–95. https://doi.org/10.1177/0974686217701467
Phillips, J. D. (2003). Corporate tax-planning effectiveness: The role of compensation-based incentives. The Accounting Review, 78(3), 847–874.
Rego, S. O., & Wilson, R. (2012). Equity risk incentives and corporate tax aggressiveness. Journal of Accounting Research, 50(3), 775–810. https://doi.org/10.1111/j.1475-679X.2012.00438.x
Richardson, G., Taylor, G., & Lanis, R. (2016). Women on the board of directors and corporate tax aggressiveness in Australia An empirical analysis. Accounting Research Journal, 29(3), 313–331. https://doi.org/10.1108/ARJ-09-2014-0079
Seidman, J. K., & Stomberg, B. (2017). Equity compensation and tax avoidance: Disentangling managerial incentives from tax benefits and reexamining the effect of shareholder rights. The Journal of the American Taxation Association, 39(2), 21–41.
Sumunar, K. I., Jannah, L., & Aulia, D. (2019). CEO overconfidence, tax avoidance, and education foundation. Jurnal Akuntansi & Auditing Indonesia, 23(2), 99–105. https://doi.org/10.20885/jaai.vol23.iss2.art4
Syverson, C. (2011). What determines productivity. Journal of Economic Literature, 49(2), 326–365. https://doi.org/10.1257/jel.49.2.326
Wen, W., Cui, H., & Ke, Y. (2020). Directors with foreign experience and corporate tax avoidance. Journal of Corporate Finance, 62, 101624. https://doi.org/10.1016/j.jcorpfin.2020.101624
Yuan, R., & Wen, W. (2018). Managerial foreign experience and corporate innovation. Journal of Corporate Finance, 48, 752–770. https://doi.org/10.1016/j.jcorpfin.2017.12.015
Zulma, G. W. M. (2016). Family ownership, management compensation, and tax avoidance: Evidence from Indonesia. The Indonesian Journal of Accounting Research, 19(1), 97–110.