Investors’ Reaction: Exploring Supervisory Function and Corporate Tax Policy
DOI:
https://doi.org/10.24857/rgsa.v18n9-046Keywords:
Independent Commissioners, Audit Committee, Corporate Tax Policy, Investor ReactionAbstract
Purpose: This study aims to analyze investor reactions to the supervisory function carried out by independent commissioners and audit committees, especially in supervising corporate tax policies taken by management.
Theoretical framework: Corporate tax policy has the risk of tax penalties in the future and risks reducing investment returns in the future, so the role of independent commissioners and audit committees should be able to supervising management so that the tax policies taken do not harm investors.
Method: 565 panel data from manufacturing companies on the Indonesia Stock Exchange 2015-2022 were analyzed with a quantitative approach and multiple linear methods using STATA.
Result: This study found that independent commissioners encourage management in tax burden minimization policies, while the audit committee is not optimal in carrying out its supervisory function over corporate tax management policies. In addition, investors react to the audit committee because it is considered capable of carrying out the supervisory function of management, while investors do not react to independent commissioners and corporate tax policies.
Research, Practical & Social implications: The results of this study encourage entities to increase the role of independent commissioners in carrying out supervisory functions such as the audit committee in order to get a positive response from investors which can increase company value for sustainability business.
Originality/value: In this study, corporate tax policy is measured by reducing the statutory tax rate with a tax compliance ratio that is rarely used in previous studies, resulting in how much corporate tax policy minimizes the tax expense.
Downloads
References
Abdeljawad, I., Al-Selkhi, J., & Abu-Ras, W. (2023). Audit Committee and Tax Avoidance: An Empirical Study on Palestinian Corporations. Lecture Notes in Networks and Systems, 621 LNNS, 265–275. https://doi.org/10.1007/978-3-031-26956-1_26
Aburajab, L., Maali, B., Jaradat, M., & Alsharairi, M. (2019). Board of Directors’ Characteristics and Tax Aggressiveness: Evidence from Jordanian Listed Firms. Theoretical Economics Letters, 09(07), 2732–2745. https://doi.org/10.4236/tel.2019.97171
Agyemang-Mintah, P., & Schadewitz, H. (2018). Audit committee adoption and firm value: evidence from UK financial institutions. International Journal of Accounting and Information Management, 26(1), 205–226. https://doi.org/10.1108/IJAIM-04-2017-0048
Al-ahdal, W. M., & Hashim, H. A. (2022). Impact of audit committee characteristics and external audit quality on firm performance: evidence from India. Corporate Governance (Bingley), 22(2), 424–445. https://doi.org/10.1108/CG-09-2020-0420
Alajmi, A., & Worthington, A. C. (2023). Corporate governance in Kuwait: joining the dots between regulatory reform, organisational change in boards and audit committees and firm market and accounting performance. Journal of Financial Reporting and Accounting, 2022–2024. https://doi.org/10.1108/JFRA-04-2022-0133
Alhady, I., Arieftiara, D., & Lastiningsih, N. (2021). Does board of commissioners independence still relevant in tax avoidance monitoring? International Journal of Research in Business and Social Science (2147- 4478), 10(5), 148–156. https://doi.org/10.20525/ijrbs.v10i5.1263
Alodat, A. Y., Salleh, Z., Hashim, H. A., & Sulong, F. (2022). Corporate governance and firm performance: empirical evidence from Jordan. Journal of Financial Reporting and Accounting, 20(5), 866–896. https://doi.org/10.1108/CG-07-2020-0286
Aloui, M., & Jarboui, A. (2018). The effects of corporate governance on the stock return volatility: During the financial crisis. International Journal of Law and Management, 60(2), 478–495. https://doi.org/10.1108/IJLMA-01-2017-0010
Amin, A., Djuminah, Surhadjanto, D., & Agustiningsih, S. W. (2017). Board-Auditor Interaction and Earnings Management : The Model of Company with Concentrated Ownership. Review of Integrative Business and Economics Research, 6(3), 217–238. https://sibresearch.org/uploads/3/4/0/9/34097180/riber_6-3_a17-208_217-238.pdf
Brigham, E. F., Houston, J. F., Hsu, J.-M., Kong, Y. K., & Bany-Ariffin, A. N. (2019). Essentials of Financial Management. In Essentials of Financial Management (4th ed.). Cengage Learning Asia Pte Limited. https://doi.org/10.3828/9781786949646
Dang, V. C., & Nguyen, Q. K. (2022). Audit committee characteristics and tax avoidance: Evidence from an emerging economy. Cogent Economics and Finance, 10(1), 1–15. https://doi.org/10.1080/23322039.2021.2023263
Daniel NA, M., Ridwansyah, E., & Makhsun, A. (2022). The effect of institutional ownership, independent commissioners, and fiscal loss compensation on tax avoidance in manufacturing companies on the IDX. Jurnal Ilmiah ESAI, 16(2), 130–141. https://jurnal.polinela.ac.id/ESAI
Deslandes, M., Fortin, A., & Landry, S. (2020). Audit committee characteristics and tax aggressiveness. Managerial Auditing Journal, 35(2), 272–293. https://doi.org/10.1108/MAJ-12-2018-2109
Dhamara, G. P., & Violita, E. S. (2018). The Influence of Financial Distress and Independence of Board of Commissioners on Tax Aggressiveness. Advances in Economics, Business and Management Research (AEBMR), 55(2018), 81–86. https://doi.org/10.2991/iac-17.2018.15
Doku, J. N., Abdul-Razak Borowa, H., Mohammed, I., & Attah-Botchwey, E. (2023). Impact of corporate board size and board independence on stock returns volatility in Ghana. Cogent Business and Management, 10(2). https://doi.org/10.1080/23311975.2023.2204597
Fariha, R., Hossain, M. M., & Ghosh, R. (2022). Board characteristics, audit committee attributes and firm performance: empirical evidence from emerging economy. Asian Journal of Accounting Research, 7(1), 84–96. https://doi.org/10.1108/AJAR-11-2020-0115
Ghitti, M., Gianfrate, G., & Palma, L. (2023). The agency of greenwashing. In Journal of Management and Governance (Issue June). Springer US. https://doi.org/10.1007/s10997-023-09683-8
Gong, X. L., Li, Y. W., Lu, J. Y., & Feng, Y. K. (2023). Independent director network, agency costs and stock price crash risk. Economic Research-Ekonomska Istrazivanja , 36(2). https://doi.org/10.1080/1331677X.2023.2177697
Hamza, T., & Zaatir, E. (2020). Does corporate tax aggressiveness explain future stock price crash? Empirical evidence from France. Journal of Financial Reporting and Accounting, 19(1), 55–76. https://doi.org/10.1108/JFRA-01-2020-0018
Handriani, E. (2020). Earning management and the effect characteristics of audit committee, independent commissioners: Evidence from Indonesia. Research in World Economy, 11(3), 108–123. https://doi.org/10.5430/rwe.v11n3p108
Handriani, E., & Robiyanto, R. (2018). Institutional ownership, independent board, the board size, and firm performance: Evidence from Indonesia. Contaduria y Administracion, 64(3), 1–16. https://doi.org/10.22201/FCA.24488410E.2018.1849
Jamei, R. (2017). International Journal of Economics and Financial Issues Tax Avoidance and Corporate Governance Mechanisms: Evidence from Tehran Stock Exchange. International Journal of Economics and Financial Issues, 7(4), 638–644. http:www.econjournals.com
Jensen, M. C., & Meckling, W. H. (1976). Theory of the Firm: Managerial behavior, Agency Cost and Ownership Sturcture. Journal of Financial Economics, 3(1976), 305–360. https://doi.org/10.1177/0018726718812602
Kawedar, W., Rizkyana, F. W., & Handayani1, R. S. (2021). The Influence of Audit Committee Characteristics And External Auditors On Earnings Quality (Study On Sharia Banks In Southeast Asia). Jurnal Akuntansi, 9(1), 74–85. https://doi.org/10.26460/ja.v9i1.2387
Khosa, A. (2017). Independent directors and firm value of group-affiliated firms. International Journal of Accounting and Information Management, 25(2), 217–236. https://doi.org/10.1108/IJAIM-08-2016-0076
Khosheghbal, M., Amiri, A., & Homayoon, A. (2017). International Journal of Economics and Financial Issues Role of Audit Committees and Board of Directors in Reducing Earning Management of Companies Listed in Tehran Stock Exchange. International Journal of Economics and Financial Issues, 7(6), 147–153. http:www.econjournals.com
Kieback, S., Thomsen, M., & Watrin, C. (2022). Market reactions to the appointment of audit committee directors with financial and industry expertise in Germany. International Journal of Auditing, 26(4), 446–466. https://doi.org/10.1111/ijau.12290
Kifli, F. M., & Juliarto, A. (2022). Tax Planning Activities and Firm Value (Study In Indonesia Consumer Goods Companies Listed in IDX Period 2016 to 2020). Diponegoro Journal of Accounting, 11(4), 1–15. http://ejournal-s1.undip.ac.id/index.php/accounting
Kuzey, C., Elbardan, H., Uyar, A., & Karaman, A. S. (2023). Do shareholders appreciate the audit committee and auditor moderation? Evidence from sustainability reporting. International Journal of Accounting and Information Management, 31(5), 808–837. https://doi.org/10.1108/IJAIM-02-2023-0033
Lamoreaux, P. T., Litov, L. P., & Mauler, L. M. (2019). lead Independent Directors: Good governance or window dressing? Journal of Accounting Literature, 43(May), 47–69. https://doi.org/10.1016/j.acclit.2019.06.001
Li, Q., Maydew, E. L., Willis, R. H., & Xu, L. (2023). Taxes and director independence: evidence from board reforms worldwide. Review of Accounting Studies, 28, 910–957. https://doi.org/https://doi.org/10.1007/s11142-021-09660-2
Marlinah, A., Susanto, Y. K., & Theodora, P. (2022). Corporate Governance and Earnings Quality: An Empirical in Indonesia. Academy of Accounting and Financial Studies Journal, 26(3), 1–8. https://doi.org/10.4108/eai.26-3-2019.2290923
Nurjanah, S., & Aligarh, F. (2022). Family Ownership, Independent Commissioners, Audit Quality, And Tax Avoidance In Indonesia. JIFA (Journal of Islamic Finance and Accounting), 4(2), 82–93. https://doi.org/10.22515/jifa.v4i2.4378
Oktavia. (2020). Independent Corporate Governance Organs Activities and Tax Avoidance Activities: Evidence from Indonesia. Jurnal Akuntansi, 24(2), 280. https://doi.org/10.24912/ja.v24i2.697
Palupi, A. (2021). Relationship between income smoothing and earnings announcement. International Symposia in Economic Theory and Econometrics, 29A, 185–193. https://doi.org/10.1108/S1571-03862021000029A026
Pamungkas, J. F., & Fachrurrozie. (2021). The Effect of the Board of Commissioners, Audit Committee, Company Size on Tax Avoidance with Leverage as an Intervening Variable. Accounting Analysis Journal, 10(3), 173–182. https://doi.org/10.15294/aaj.v10i3.51438
Prabowo, B., Rochmatulaili, E., Rusdiyanto, & Sulistyowati, E. (2020). Corporate governance and its impact in company’s stock price: case study; [Gobernabilidad corporativa y su impacto en el precio de las acciones de las empresas: Estudio de caso]. Utopia y Praxis Latinoamericana, 25(Extra10), 187 – 196. https://www.scopus.com/inward/record.uri?eid=2-s2.0-85095958090&doi=10.5281%2Fzenodo.4155459&partnerID=40&md5=a8dbd583cc26d4eaa58db1e3c3f8e379
Sakdiyah, R., & Setiyono, W. P. (2020). The Influence of Independent Commissioners, Audit Committees, Corporate Social Responsibility (CSR) on Tax Avoidance in Manufacturing Companies in the Goods and Consumption SubSector in 2016-2020. Academia Open, 7(2022), 1–15. https://doi.org/10.21070/acopen.7.2022.3424
Santoso, M. R., Maksum, A., & Bukit, R. B. (2022). Shareholders And Independent Commissioners In Influencing The Tax Planning Strategy. Webology, 19(2), 8115–8131.
Seifzadeh, M. (2022). The Effectiveness of Management Ability on Firm Value and Tax Avoidance. Journal of Risk and Financial Management, 15(11), 1–15. https://doi.org/10.3390/jrfm15110539
Setiany, E., Utami, W., & Zamzami, A. H. (2023). Firm Value: Competitive Position and Corporate Governance During the Covid-19 Pandemic. Journal of Governance and Regulation, 12(3 Special Issue), 266–273. https://doi.org/10.22495/jgrv12i3siart8
Setiawan, F. A., Kurniawati, H., & Kristanto, S. B. (2020). The Influence of Women in the Board of Commissioners, CFO, and the Audit Committee on Earnings Quality. Jurnal Akuntansi, 24(2), 204. https://doi.org/10.24912/ja.v24i2.691
Setiawati, L., Icih, I., & Suangga, A. (2019). The Effect of Company Sizes, The Number of Board of Commissioners, Board of Directors Competence and Audit Committees on Tax Management. JABI (Journal of Accounting and Business Issues), 1(1), 22–33. https://ojs.stiesa.ac.id/index.php/jabi
Shi, X., Wang, J., & Ren, X. (2023). Share pledging and earnings informativeness. International Journal of Accounting and Information Management, 31(2), 270–299. https://doi.org/10.1108/IJAIM-09-2022-0195
Siagian, D., & Siregar, S. V. (2018). The Effect of Audit Committee Financial Expertise And Relative Status On Earnings Management: Case of Indonesia. Jurnal Akuntansi, 22(3), 321. https://doi.org/10.24912/ja.v22i3.391
Suriawinata, I. S., & Almurni, S. (2023). Corporate tax planning, the use of SPV, board independence, and firm value. Jurnal Ekonomi Dan Bisnis, 26(1), 67–90. https://doi.org/10.24914/jeb.v26i1.6383
Syura, A., Arfan, M., & Anzib, N. (2020). Influencers to Firm Value: Does Tax Avoidance Plays a Mediating Role? Jurnal ASET (Akuntansi Riset), 12(2), 265–277. https://doi.org/10.17509/jaset.v12i2.28497
Tarmidi, D., Alfia, Y. D., & Umar, H. (2022). Analyzing Owner’s Role in Influencing Corporate Tax Policy. Humanities and Social Sciences Letters, 10(4), 428–439. https://doi.org/10.18488/73.V10I4.3107
Tran, Q. T. (2019). Independent directors and corporate investment: evidence from an emerging market. Journal of Economics and Development, ahead-of-p(ahead-of-print), 30–41. https://doi.org/10.1108/jed-06-2019-0008
Utaminingsih, N. S., Kurniasih, D., Pramono Sari, M., & Helmina, M. R. A. (2022). The role of internal control in the relationship of board gender diversity, audit committee, and independent commissioner on tax aggressiveness. Cogent Business and Management, 9(1), 1–17. https://doi.org/10.1080/23311975.2022.2122333
Wen, W., Cui, H., & Ke, Y. (2020). Directors with foreign experience and corporate tax avoidance. Journal of Corporate Finance, 62(March), 101624. https://doi.org/10.1016/j.jcorpfin.2020.101624
Yasser, Q. R., Mamun, A. Al, & Ahmed, I. (2016). Quality of financial reporting in the Asia-Pacific region: The influence of ownership composition. Review of International Business and Strategy, 26(4), 543–560. https://doi.org/10.1108/RIBS-02-2016-0011
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2024 Deden Tarmidi, Sekar Mayangsari, Nurlis, Lin Oktris
This work is licensed under a Creative Commons Attribution 4.0 International License.
•The author(s) authorize(s) the publication of the article in the journal; • The author(s) guarantee the contribution is original and novel, and is not under evaluation in any other publication(s); • The editorial team is not responsible for the opinions, ideas and concepts emitted in the published texts, these being the full responsibility of the author(s); • It is reserved to the editors the right to proceed with adjustments related to the text and compliance with publication standards.