Ownership Structure, Profitability, and Dividend Payout Ratio in Explaining Tax Avoidance

Fayakunarto Fayakunarto; Lucky Nugroho

doi:10.70550/bisma.v3i2.275

Authors

Fayakunarto Fayakunarto Universitas Mercu Buana, Indonesia Author
Lucky Nugroho Universitas Mercu Buana, Indonesia Author

DOI:

https://doi.org/10.70550/bisma.v3i2.275

Keywords:

Tax Avoidance, Institutional Ownership, Managerial Ownership, Foreign Ownership, Dividend Payout Ratio

Abstract

Tax avoidance is a salient topic in corporate finance and sits at the intersection of interests between the entity that receives tax—the government—and the firm, for which taxes are an impediment or barrier to maximising profit, cash flow and dividends. The seson 2020-2023 is very interesting since that period is post pandemic recovery and the application of Harmonization of Tax Regulations (HPP) Law—On March 29, 2000 the enactment end date for firms listed in the Main Board of Indonesia Stock Exchange. This research aims to analyze daan empirical test on inflation and the variables (independent) that include ownership distribution by institution (institutional ownership), management ownership, foreign ownership, profitability (represented by ROA), as well as Dividend Payout Ratio on tax avoidance. The data in this study used financial statements and annual reports from 124 companies listed on the Main Board over a period of four years (with a total sample of 496 observations), and panel data regression analysis using Random Effect Model with classical assumption testing. The results demonstrate that institutional, managerial and foreign ownership represents a significant increase in tax avoidance behavior while ROA and Dividend Payout Ratio reveal a significant negative relationship with the behaviors. These results provide insights into how owner pressure may facilitate tax efficiency and that strong dividend performance and policies likely hinder firms' efforts to avoid taxes. The novelty of this research is the opportunity to analyze ownership structure along with profitability and dividend policy at the same time during a period of change in post-pandemic tax rules, providing new perspectives to improve corporate tax governance in Indonesia.

Downloads

Download data is not yet available.

References

Alkurdi, A., & Mardini, G. H. (2020). The Impact of Ownership Structure and the Board of Directors’ Composition on Tax Avoidance Strategies: Empirical Evidence From Jordan. Journal of Financial Reporting and Accounting, 18(4), 795–812. https://doi.org/10.1108/jfra-01-2020-0001

Colombo, J. A., & Terra, P. R. S. (2022). Interest on Equity Versus Dividends: The Role of Shareholder Identity on Corporate Tax Avoidance. Review of Business Management, 24(1), 175–205. https://doi.org/10.7819/rbgn.v24i1.4155

Dakhli, A. (2021). The Impact of Ownership Structure on Corporate Tax Avoidance With Corporate Social Responsibility as Mediating Variable. Journal of Financial Crime, 29(3), 836–852. https://doi.org/10.1108/jfc-07-2021-0152

Davidoff, T., Akaabre, P., & Jones, C. (2022). Policy Forum: The Prevalence of Low Income Tax Payments Among Owners of Expensive Homes in Vancouver and Toronto. Canadian Tax Journal/Revue Fiscale Canadienne, 70(4), 843–859. https://doi.org/10.32721/ctj.2022.70.4.pf.davidoff

Hanifah, F., Widiastuti, E., & Najmudin, N. (2024). The Effect of Tax Avoidance, Profitability, and Leverage on Dividend Policy: Liquidity as Moderating Variable. Marginal Journal of Management Accounting General Finance and International Economic Issues, 3(2), 376–387. https://doi.org/10.55047/marginal.v3i2.913

Hassan, N., Masum, M. H., & Sarkar, J. B. (2022). Ownership Structure and Corporate Tax Avoidance: Evidence From the Listed Companies of Bangladesh. Polish Journal of Management Studies, 25(1), 147–161. https://doi.org/10.17512/pjms.2022.25.1.09

Hidayat, T. (2022). The Effect of Institutional Ownership and Auditor Independence on Tax Avoidance. International Journal of Economics (Ijec), 1(2), 405–412. https://doi.org/10.55299/ijec.v1i2.276

Jati, A. W., Ulum, I., & Utomo, C. (2019). Tax avoidance, corporate governance and financial performance of companies registered in the Jakarta Islamic Index. Jurnal Reviu Akuntansi Dan Keuangan, 9(2), 214–225. https://doi.org/https://doi.org/10.22219/jrak.v9i2.57

Jovković, B., & Vržina, S. (2021). Taxation and Dividend Payout: The Case of the Republic of Serbia. Management Journal of Sustainable Business and Management Solutions in Emerging Economies, 26(3), 35–46. https://doi.org/10.7595/management.fon.2021.0016

Khan, M., Srinivasan, S., & Tan, L. S. (2016). Institutional Ownership and Corporate Tax Avoidance: New Evidence. The Accounting Review, 92(2), 101–122. https://doi.org/10.2308/accr-51529

Khương, N. V., Liêm, N. T., Thu, P. A., & Khanh, T. H. T. (2020). Does Corporate Tax Avoidance Explain Firm Performance? Evidence From an Emerging Economy. Cogent Business & Management, 7(1). https://doi.org/10.1080/23311975.2020.1780101

Murdijaningsih, T., Solihah, M., & Danuta, K. S. (2020). Tax Avoidance of Mining Companies From the Return on Assets, Institutional Ownership, and Audit Committee Perspectives. Journal of Business Management Review, 1(2), 76–89. https://doi.org/10.47153/jbmr12.172020

Noorica, F., & Asalam, A. G. (2021). Pengaruh kepemilikan institusional, kepemilikan manajerial, dan karakter eksekutif terhadap tax avoidance. Competitive Jurnal Akuntansi Dan Keuangan, 5(2), 221–232. https://doi.org/https://doi.org/10.31000/competitive.v5i2.5041

Novita, E. S., & Herliansyah, Y. (2019). The Effect of Corporate Governance Mechanism, Liquidity and Company Size on Tax Avoidance. Saudi Journal of Economics and Finance, 03(10), 366–373. https://doi.org/10.36348/sjef.2019.v03i09.001

Permatasari, Y. I. (2022). Pengaruh pemahaman dan pengetahuan, kesadaran, pelayanan pajak, dan sanksi pajak terhadap kepatuhan wajib pajak (Studi empiris wajib pajak orang pribadi di Desa Denggungan, Kec. Banyudono, Kab. Boyolali). Seminar Nasional Pariwisata Dan Kewirausahaan (SNPK), 1, 356–365.

Rizki, M., & Nugroho, L. (2024). How Institusional and Manajerial Ownership, Transfer Pricing and Company Size Affect Tax Avoidance? Economic and Business Horizon, 3(2), 35–47.

Shi, A. A., Concepcion, F. R., Laguinday, C. M. R., Huy, T. A. T. O. H., & Unite, A. A. (2020). An Analysis of the Effects of Foreign Ownership on the Level of Tax Avoidance Across Philippine Publicly Listed Firms. Dlsu Business & Economics Review, 30(1). https://doi.org/10.59588/2243-786x.1115

Velte, P. (2023). Ownership Structure and Corporate Tax Avoidance: A Structured Literature Review On archival Research. Journal of Applied Accounting Research, 25(3), 696–731. https://doi.org/10.1108/jaar-10-2022-0259

Widadi, F. A., Subroto, B., & Rahman, ‪Aulia F. (2022). Tax Avoidance Mediated by Constitutional Ownership as Moderating Variables. Etikonomi, 21(2), 411–430. https://doi.org/10.15408/etk.v21i2.25799‬

Yusri, N., Astuti, S. W. W., Irawan, D., & Juanda, A. (2022). Ownership Structure on Tax Avoidance: Empirical Study on Manufacturing Companies. JBMP (Jurnal Bisnis Manajemen Dan Perbankan), 8(2), 151–159. https://doi.org/10.21070/jbmp.v8i2.1596

Zaenuddin, A. A., & Thamrin, D. B. (2023). Pengaruh Return On Assets, Ukuran Perusahaan, Kompensasi Rugi Fiskal, Dan Kepemilikan Institusional Terhadap Tax Avoidance. Jurnal Akuntansi Dan Governance, 3(2), 140–152. https://doi.org/https://doi.org/10.24853/jago.3.2.140-152