Board Characteristics and Tax Avoidance: The Mediating Role of Integrated Reporting Quality
Abstract
This study examines the nexus between female directors, independent commissioners, board size, political connections, and Corporate Tax Avoidance (CTA) within the non-cyclical consumer goods sector of the Indonesian Stock Exchange (IDX) from 2019 to 2022. The research also tests the mediating influence of Integrated Reporting Quality (IR), addressing the significance of Integrated Reporting in Indonesia. Using SmartPLS 3 and PLS-SEM, the findings reveal that female directors are negatively associated with Tax Avoidance, while board size has a positive effect, and independent commissioners and political connections show insignificant impacts. The mediating role of IR Quality indicates that improved reporting quality reduces tax avoidance in relation to board characteristics and political connections. The study underscores the importance of IR quality in enhancing corporate transparency and reducing fraudulent activities, advocating for the adoption of Integrated Reporting frameworks by both government bodies and companies.
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References
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Ajili, H., & Khlif, H. (2020). Political connections, joint audit and tax avoidance: evidence from Islamic banking industry. Journal of Financial Crime, 27(1), 155–171. https://doi.org/10.1108/JFC-01-2019-0015
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
Amara, I., & Khlif, H. (2020). A review of the influence of political connections on management’s decision in non-US settings. Journal of Financial Reporting and Accounting, 18(4), 687–705. https://doi.org/10.1108/JFRA-03-2020-0075
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Boubaker, S., Derouiche, I., & Nguyen, H. (2022). Voluntary disclosure, tax avoidance and family firms. Journal of Management and Governance, 26(1), 129–158. https://doi.org/10.1007/s10997-021-09601-w
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Githaiga, P. N., Muturi Kabete, P., & Caroline Bonareri, T. (2022). Board characteristics and earnings management. Does firm size matter? Cogent Business and Management, 9(1). https://doi.org/10.1080/23311975.2022.2088573
Gull, A. A., Nekhili, M., Nagati, H., & Chtioui, T. (2018). Beyond gender diversity: How specific attributes of female directors affect earnings management. British Accounting Review, 50(3), 255–274. https://doi.org/10.1016/j.bar.2017.09.001
Hair, J. F., Howard, M. C., & Nitzl, C. (2020). Assessing measurement model quality in PLS-SEM using confirmatory composite analysis. Journal of Business Research, 109(August 2019), 101–110. https://doi.org/10.1016/j.jbusres.2019.11.069
Hair, J. F., Hult, G. T. M., Ringle, C. M., Sarstedt, M., Danks, N. P., & Ray, S. (2021). Partial Least Squares Structural Equation Modeling (PLS-SEM) Using R. In Long Range Planning (Vol. 46, Issues 1–2). Springer International Publishing. https://doi.org/10.1007/978-3-030-80519-7
Hair, J. F., Risher, J. J., Sarstedt, M., & Ringle, C. M. (2019). When to use and how to report the results of PLS-SEM. European Business Review, 31(1), 2–24. https://doi.org/10.1108/EBR-11-2018-0203
Hanlon, M., & Heitzman, S. (2010). A review of tax research. Journal of Accounting and Economics, 50(2–3), 127–178. https://doi.org/10.1016/j.jacceco.2010.09.002
Hoseini, M., Safari Gerayli, M., & Valiyan, H. (2019). Demographic characteristics of the board of directors’ structure and tax avoidance: Evidence from Tehran Stock Exchange. International Journal of Social Economics, 46(2), 199–212. https://doi.org/10.1108/IJSE-11-2017-0507
IIRC. (2021). International < Ir > Framework (Issue Januari). http://www.integratedreporting.org/wp-content/uploads/2022/08/IntegratedReportingFramework_081922.pdf
Iswari, P., Sudaryono, E. A., & Widarjo, W. (2019). Political connection and tax aggressiveness: A study on the state-owned enterprises registered in Indonesia stock exchange. Journal of International Studies, 12(1), 79–92. https://doi.org/10.14254/2071-8330.2019/12-1/5
Jarboui, A., Kachouri Ben Saad, M., & Riguen, R. (2020). Tax avoidance: do board gender diversity and sustainability performance make a difference? Journal of Financial Crime, 27(4), 1389–1408. https://doi.org/10.1108/JFC-09-2019-0122
Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305–360. https://doi.org/10.1016/0304-405X(76)90026-X
Kalbuana, N., Taqi, M., Uzliawati, L., & Ramdhani, D. (2022). The Effect of Profitability, Board Size, Woman on Boards, and Political Connection on Financial Distress Conditions. Cogent Business and Management, 9(1). https://doi.org/10.1080/23311975.2022.2142997
Kalbuana, N., Taqi, M., Uzliawati, L., & Ramdhani, D. (2023). CEO narcissism, corporate governance, financial distress, and company size on corporate tax avoidance. Cogent Business and Management, 10(1). https://doi.org/10.1080/23311975.2023.2167550
Kim, C., & Zhang, L. (2016). Corporate Political Connections and Tax Aggressiveness. Contemporary Accounting Research, 33(1), 78–114. https://doi.org/10.1111/1911-3846.12150
Kim, D., & Starks, L. T. (2016). Gender diversity on corporate boards: Do women contribute unique skills? American Economic Review, 106(5), 267–271. https://doi.org/10.1257/aer.p20161032
Kurniasih, L., Yusri, Y., & Hassan, A. F. S. (2022). Association of Tax Haven and Corporate Tax Avoidance: Does Political Connection Matter? International Journal of Economics and Management, 16(SpecialIssue1), 1–13. https://doi.org/10.47836/IJEAMSI.16.1.001
Landry, S., Deslandes, M., & Fortin, A. (2013). Tax aggressiveness, corporate social responsibility, and ownership structure. Journal of Accounting, Ethics and Public Policy, 14(3), 611–645. https://doi.org/10.2139/ssrn.2304653
Muhmad, S. N., Haat, M. H. C., Taha, R., Rashid, N., & Muhmad, S. N. (2020). The influence of the financial indicators towards the changes of the corporate tax avoidance. Journal of Advanced Research in Dynamical and Control Systems, 12(1), 167–171. https://doi.org/10.5373/JARDCS/V12I1/20201026
Muttakin, M. B., Mihret, D. G., & Khan, A. (2018). Corporate political connection and corporate social responsibility disclosures. Accounting, Auditing & Accountability Journal, 31(2), 725–744. https://doi.org/10.1108/AAAJ-06-2015-2078
Nurbaiti, A., & Elisabet, C. (2023). The Integrity Of Financial Statements: Firm Size, Independent Commissioners, And Auditor Industry Specializations. Jurnal Akuntansi, 27(1), 1–18. https://doi.org/10.24912/ja.v27i1.1086
Nuswantara, D. A., Fachruzzaman, D. A., Prameswari, R. D., Suyanto, R. D., Rusdiyanto, R., & Hendrati, I. M. (2023). The role of political connection to moderate board size, woman on boards on financial distress. Cogent Business and Management, 10(1). https://doi.org/10.1080/23311975.2022.2156704
Oats, L., & Tuck, P. (2019). Corporate tax avoidance: is tax transparency the solution? Accounting and Business Research, 49(5), 565–583. https://doi.org/10.1080/00014788.2019.1611726
Payne, D. M., & Raiborn, C. A. (2018). Aggressive Tax Avoidance: A Conundrum for Stakeholders, Governments, and Morality. Journal of Business Ethics, 147(3), 469–487. https://doi.org/10.1007/s10551-015-2978-5
Pratama, A. (2020). Corporate governance, foreign operations and transfer pricing practice: The case of Indonesian manufacturing companies. International Journal of Business and Globalisation, 24(2), 185–200. https://doi.org/10.1504/IJBG.2020.105167
Qaderi, S. A., Ghaleb, B. A. A., Hashed, A. A., Chandren, S., & Abdullah, Z. (2022). Board Characteristics and Integrated Reporting Strategy: Does Sustainability Committee Matter? Sustainability (Switzerland), 14(10), 1–24. https://doi.org/10.3390/su14106092
Salhi, B., Al Jabr, J., & Jarboui, A. (2020). A comparison of corporate governance and tax avoidance of UK and Japanese firms. Comparative Economic Research, 23(3), 111–132. https://doi.org/10.18778/1508-2008.23.23
Sethi, S. P. (1975). Dimensions of Corporate Social Performance: An Analytical Framework. California Management Review, 17(3), 58–64. https://doi.org/10.2307/41162149
Shleifer, A., & Vishny, R. W. (2002). The Grabbing Hand Government Pathologies and Their Cures.
Utomo, M. N., Wahyudi, S., Muharam, H., & Sianturi, J. A. T. P. (2018). Commissioner board monitoring to create firm performance through environmentally friendly management. Journal of Environmental Management and Tourism, 9(3), 659–676. https://doi.org/10.14505/jemt.9.3(27).26
Uzliawati, L., Kalbuana, N., Budyastuti, T., Budiharjo, R., Kusiyah, & Ahalik. (2023). The power of sustainability, corporate governance, and millennial leadership: Exploring the impact on company reputation. Uncertain Supply Chain Management, 11(3), 1275–1288. https://doi.org/10.5267/j.uscm.2023.3.020
Vitolla, F., Raimo, N., & Rubino, M. (2020). Board characteristics and integrated reporting quality: an agency theory perspective. Corporate Social Responsibility and Environmental Management, 27(2), 1152–1163. https://doi.org/10.1002/csr.1879
Yuniarwati, I Cenik Ardana, Sofia Prima Dewi, & Caroline Lin. (2017). Factors That Influence Tax Avoidance in Indonesia Stock Exchange. Chinese Business Review, 16(10). https://doi.org/10.17265/1537-1506/2017.10.005
Zulfikar, R., Lukviarman, N., Suhardjanto, D., Ismail, T., Astuti, K. D., & Meutia, M. (2020). Corporate governance compliance in banking industry: The role of the board. Journal of Open Innovation: Technology, Market, and Complexity, 6(4), 1–18. https://doi.org/10.3390/joitmc6040137
Adegboyegun, A. E., Alade, M. E., Ben-Caleb, E., Ademola, A. O., Eluyela, D. F., & Oladipo, O. A. (2020). Integrated reporting and corporate performance in Nigeria: Evidence from the banking industry. Cogent Business and Management, 7(1). https://doi.org/10.1080/23311975.2020.1736866
Ajili, H., & Khlif, H. (2020). Political connections, joint audit and tax avoidance: evidence from Islamic banking industry. Journal of Financial Crime, 27(1), 155–171. https://doi.org/10.1108/JFC-01-2019-0015
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
Amara, I., & Khlif, H. (2020). A review of the influence of political connections on management’s decision in non-US settings. Journal of Financial Reporting and Accounting, 18(4), 687–705. https://doi.org/10.1108/JFRA-03-2020-0075
Ashforth, B. E., & Gibbs, B. W. (1990). The Double-Edge of Organizational Legitimation. Organization Science, 1(2), 177–194. https://doi.org/10.1287/orsc.1.2.177
Astuti, T. P., & Aryani, Y. A. (2016). Astuti dan Aryani: Tren Pengindaran Pajak Perusahaan Manufaktur di Indonesia…. Jurnal Akuntansi, XX No. 03(03), 375–388. www.pajak.go.id
Boubaker, S., Derouiche, I., & Nguyen, H. (2022). Voluntary disclosure, tax avoidance and family firms. Journal of Management and Governance, 26(1), 129–158. https://doi.org/10.1007/s10997-021-09601-w
Das, S. (2019). Cash flow ratios and financial performance: A comparative study. Accounting, 5(1), 1–20. https://doi.org/10.5267/j.ac.2018.6.004
Donkor, A., Djajadikerta, H. G., Mat Roni, S., & Trireksani, T. (2022). Integrated reporting quality and corporate tax avoidance practices in South Africa’s listed companies. Sustainability Accounting, Management and Policy Journal, 13(4), 899–928. https://doi.org/10.1108/SAMPJ-03-2021-0116
Firmansyah, A., Arham, A., Qadri, R. A., Wibowo, P., Irawan, F., Kustiani, N. A., Wijaya, S., Andriani, A. F., Arfiansyah, Z., Kurniawati, L., Mabrur, A., Dinarjito, A., Kusumawati, R., & Mahrus, M. L. (2022). Political connections, investment opportunity sets, tax avoidance: does corporate social responsibility disclosure in Indonesia have a role? Heliyon, 8(8). https://doi.org/10.1016/j.heliyon.2022.e10155
García-Sánchez, I. M., & Noguera-Gámez, L. (2017). Integrated information and the cost of capital. International Business Review, 26(5), 959–975. https://doi.org/10.1016/j.ibusrev.2017.03.004
Githaiga, P. N., Muturi Kabete, P., & Caroline Bonareri, T. (2022). Board characteristics and earnings management. Does firm size matter? Cogent Business and Management, 9(1). https://doi.org/10.1080/23311975.2022.2088573
Gull, A. A., Nekhili, M., Nagati, H., & Chtioui, T. (2018). Beyond gender diversity: How specific attributes of female directors affect earnings management. British Accounting Review, 50(3), 255–274. https://doi.org/10.1016/j.bar.2017.09.001
Hair, J. F., Howard, M. C., & Nitzl, C. (2020). Assessing measurement model quality in PLS-SEM using confirmatory composite analysis. Journal of Business Research, 109(August 2019), 101–110. https://doi.org/10.1016/j.jbusres.2019.11.069
Hair, J. F., Hult, G. T. M., Ringle, C. M., Sarstedt, M., Danks, N. P., & Ray, S. (2021). Partial Least Squares Structural Equation Modeling (PLS-SEM) Using R. In Long Range Planning (Vol. 46, Issues 1–2). Springer International Publishing. https://doi.org/10.1007/978-3-030-80519-7
Hair, J. F., Risher, J. J., Sarstedt, M., & Ringle, C. M. (2019). When to use and how to report the results of PLS-SEM. European Business Review, 31(1), 2–24. https://doi.org/10.1108/EBR-11-2018-0203
Hanlon, M., & Heitzman, S. (2010). A review of tax research. Journal of Accounting and Economics, 50(2–3), 127–178. https://doi.org/10.1016/j.jacceco.2010.09.002
Hoseini, M., Safari Gerayli, M., & Valiyan, H. (2019). Demographic characteristics of the board of directors’ structure and tax avoidance: Evidence from Tehran Stock Exchange. International Journal of Social Economics, 46(2), 199–212. https://doi.org/10.1108/IJSE-11-2017-0507
IIRC. (2021). International < Ir > Framework (Issue Januari). http://www.integratedreporting.org/wp-content/uploads/2022/08/IntegratedReportingFramework_081922.pdf
Iswari, P., Sudaryono, E. A., & Widarjo, W. (2019). Political connection and tax aggressiveness: A study on the state-owned enterprises registered in Indonesia stock exchange. Journal of International Studies, 12(1), 79–92. https://doi.org/10.14254/2071-8330.2019/12-1/5
Jarboui, A., Kachouri Ben Saad, M., & Riguen, R. (2020). Tax avoidance: do board gender diversity and sustainability performance make a difference? Journal of Financial Crime, 27(4), 1389–1408. https://doi.org/10.1108/JFC-09-2019-0122
Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305–360. https://doi.org/10.1016/0304-405X(76)90026-X
Kalbuana, N., Taqi, M., Uzliawati, L., & Ramdhani, D. (2022). The Effect of Profitability, Board Size, Woman on Boards, and Political Connection on Financial Distress Conditions. Cogent Business and Management, 9(1). https://doi.org/10.1080/23311975.2022.2142997
Kalbuana, N., Taqi, M., Uzliawati, L., & Ramdhani, D. (2023). CEO narcissism, corporate governance, financial distress, and company size on corporate tax avoidance. Cogent Business and Management, 10(1). https://doi.org/10.1080/23311975.2023.2167550
Kim, C., & Zhang, L. (2016). Corporate Political Connections and Tax Aggressiveness. Contemporary Accounting Research, 33(1), 78–114. https://doi.org/10.1111/1911-3846.12150
Kim, D., & Starks, L. T. (2016). Gender diversity on corporate boards: Do women contribute unique skills? American Economic Review, 106(5), 267–271. https://doi.org/10.1257/aer.p20161032
Kurniasih, L., Yusri, Y., & Hassan, A. F. S. (2022). Association of Tax Haven and Corporate Tax Avoidance: Does Political Connection Matter? International Journal of Economics and Management, 16(SpecialIssue1), 1–13. https://doi.org/10.47836/IJEAMSI.16.1.001
Landry, S., Deslandes, M., & Fortin, A. (2013). Tax aggressiveness, corporate social responsibility, and ownership structure. Journal of Accounting, Ethics and Public Policy, 14(3), 611–645. https://doi.org/10.2139/ssrn.2304653
Muhmad, S. N., Haat, M. H. C., Taha, R., Rashid, N., & Muhmad, S. N. (2020). The influence of the financial indicators towards the changes of the corporate tax avoidance. Journal of Advanced Research in Dynamical and Control Systems, 12(1), 167–171. https://doi.org/10.5373/JARDCS/V12I1/20201026
Muttakin, M. B., Mihret, D. G., & Khan, A. (2018). Corporate political connection and corporate social responsibility disclosures. Accounting, Auditing & Accountability Journal, 31(2), 725–744. https://doi.org/10.1108/AAAJ-06-2015-2078
Nurbaiti, A., & Elisabet, C. (2023). The Integrity Of Financial Statements: Firm Size, Independent Commissioners, And Auditor Industry Specializations. Jurnal Akuntansi, 27(1), 1–18. https://doi.org/10.24912/ja.v27i1.1086
Nuswantara, D. A., Fachruzzaman, D. A., Prameswari, R. D., Suyanto, R. D., Rusdiyanto, R., & Hendrati, I. M. (2023). The role of political connection to moderate board size, woman on boards on financial distress. Cogent Business and Management, 10(1). https://doi.org/10.1080/23311975.2022.2156704
Oats, L., & Tuck, P. (2019). Corporate tax avoidance: is tax transparency the solution? Accounting and Business Research, 49(5), 565–583. https://doi.org/10.1080/00014788.2019.1611726
Payne, D. M., & Raiborn, C. A. (2018). Aggressive Tax Avoidance: A Conundrum for Stakeholders, Governments, and Morality. Journal of Business Ethics, 147(3), 469–487. https://doi.org/10.1007/s10551-015-2978-5
Pratama, A. (2020). Corporate governance, foreign operations and transfer pricing practice: The case of Indonesian manufacturing companies. International Journal of Business and Globalisation, 24(2), 185–200. https://doi.org/10.1504/IJBG.2020.105167
Qaderi, S. A., Ghaleb, B. A. A., Hashed, A. A., Chandren, S., & Abdullah, Z. (2022). Board Characteristics and Integrated Reporting Strategy: Does Sustainability Committee Matter? Sustainability (Switzerland), 14(10), 1–24. https://doi.org/10.3390/su14106092
Salhi, B., Al Jabr, J., & Jarboui, A. (2020). A comparison of corporate governance and tax avoidance of UK and Japanese firms. Comparative Economic Research, 23(3), 111–132. https://doi.org/10.18778/1508-2008.23.23
Sethi, S. P. (1975). Dimensions of Corporate Social Performance: An Analytical Framework. California Management Review, 17(3), 58–64. https://doi.org/10.2307/41162149
Shleifer, A., & Vishny, R. W. (2002). The Grabbing Hand Government Pathologies and Their Cures.
Utomo, M. N., Wahyudi, S., Muharam, H., & Sianturi, J. A. T. P. (2018). Commissioner board monitoring to create firm performance through environmentally friendly management. Journal of Environmental Management and Tourism, 9(3), 659–676. https://doi.org/10.14505/jemt.9.3(27).26
Uzliawati, L., Kalbuana, N., Budyastuti, T., Budiharjo, R., Kusiyah, & Ahalik. (2023). The power of sustainability, corporate governance, and millennial leadership: Exploring the impact on company reputation. Uncertain Supply Chain Management, 11(3), 1275–1288. https://doi.org/10.5267/j.uscm.2023.3.020
Vitolla, F., Raimo, N., & Rubino, M. (2020). Board characteristics and integrated reporting quality: an agency theory perspective. Corporate Social Responsibility and Environmental Management, 27(2), 1152–1163. https://doi.org/10.1002/csr.1879
Yuniarwati, I Cenik Ardana, Sofia Prima Dewi, & Caroline Lin. (2017). Factors That Influence Tax Avoidance in Indonesia Stock Exchange. Chinese Business Review, 16(10). https://doi.org/10.17265/1537-1506/2017.10.005
Zulfikar, R., Lukviarman, N., Suhardjanto, D., Ismail, T., Astuti, K. D., & Meutia, M. (2020). Corporate governance compliance in banking industry: The role of the board. Journal of Open Innovation: Technology, Market, and Complexity, 6(4), 1–18. https://doi.org/10.3390/joitmc6040137
Authors
Dwi ramadhan, S. ., Saputra, D., Nawas, A., & Abdul Rahman, F. (2024). Board Characteristics and Tax Avoidance: The Mediating Role of Integrated Reporting Quality . Agregat: Jurnal Ekonomi Dan Bisnis, 7(2), 174–197. https://doi.org/10.22236/agregat_vol7.i2/16394
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