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Tax Tightrope: The Perils of Foreign Ownership, Executive Incentives and Transfer Pricing in Indonesian Banking

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  • Vidiyanna Rizal Putri

    (Accounting Department, STIE Indonesia Banking School, Jakarta 12730, Indonesia)

  • Nor Balkish Zakaria

    (Accounting Research Institute, Universiti Teknologi MARA, Shah Alam 40450, Malaysia)

  • Jamaliah Said

    (Accounting Research Institute, Universiti Teknologi MARA, Shah Alam 40450, Malaysia)

  • Farha Ghapar

    (Faculty of Business, Accountancy & Social Sciences, Universiti Poly-Tech, Kuala Lumpur 56100, Malaysia)

  • Rizqa Anita

    (Department of Accounting, Universitas Lancang Kuning, Pekanbaru 28266, Indonesia)

Abstract

Despite being a crucial source of funding for the government, tax revenue collection in Indonesia has yet to reach its ideal and satisfying level for the economy. Therefore, this study explores the impact of executive incentives, foreign ownership, and transfer pricing on tax avoidance. The conventional banks of Indonesia that were listed on the Indonesia Stock Exchange (IDX) between 2015 and 2019 are the subject of this study. This study employed a purposive selection technique, with a final sample of 17 banks chosen after screening to ensure they met the requirements of having foreign ownership and not having suffered losses during the study year. The results of this study show that while CEO incentives harm tax avoidance, foreign ownership has a beneficial effect. Furthermore, tax avoidance is not significantly impacted by transfer pricing. The findings of this investigation open the door for accountable authorities in the economy.

Suggested Citation

  • Vidiyanna Rizal Putri & Nor Balkish Zakaria & Jamaliah Said & Farha Ghapar & Rizqa Anita, 2024. "Tax Tightrope: The Perils of Foreign Ownership, Executive Incentives and Transfer Pricing in Indonesian Banking," JRFM, MDPI, vol. 17(1), pages 1-18, January.
    • Handle: RePEc:gam:jjrfmx:v:17:y:2024:i:1:p:26-:d:1316895
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    References listed on IDEAS

    as
    1. Armstrong, Christopher S. & Blouin, Jennifer L. & Jagolinzer, Alan D. & Larcker, David F., 2015. "Corporate governance, incentives, and tax avoidance," Journal of Accounting and Economics, Elsevier, vol. 60(1), pages 1-17.
    2. Armstrong, Christopher S. & Blouin, Jennifer L. & Jagolinzer, Alan D. & Larcker, David F., 2015. "Corporate Governance, Incentives, and Tax Avoidance," Research Papers 2134, Stanford University, Graduate School of Business.
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