IDEAS home Printed from https://ideas.repec.org/a/iaf/journl/y2022i4p131-138.html
   My bibliography  Save this article

The Effect of Sales Growth, Profitability and Leverage on Tax Avoidance with Firm Size as Moderating Variable

Author

Listed:
  • Cindy

    (Universitas Prima Indonesia, Medan, Indonesia)

  • Rasinta Ria Ginting

    (Universitas Prima Indonesia, Medan, Indonesia)

Abstract

Beliefs about the rationality of economic agents and the predominantly controlling nature of tax policy may lead to the opinion that companies a priori do not want to pay taxes and are interested in keeping most of the income for themselves. Numerous studies show that many factors influence the tax behavior of companies. This study analyzes the effect of sales growth, profitability, and leverage on tax avoidance with firm size as moderating variable. In this study, the researchers use an Effective Tax Rate (ETR), whereas previous studies used Cash Effective Tax Rate (CETR) as an indicator for measuring tax avoidance. The object of research is service companies in the infrastructure, utilities, and transportation sectors listed on Indonesia Stock Exchange from 2016 to 2020. Tax avoidance is represented by the Effective Tax Rate (ETR) and is the dependent variable. Sales growth is calculated by comparing current sales with previous years' sales. Profitability is measured as Return on Assets (ROA). Leverage is measured as Debt-to-Equity Ratio (DER). Firm size (SIZE) is measured by the natural logarithm of total assets and is moderating variable. This study uses quantitative secondary data from the financial reports of service companies in the infrastructure, utilities, and transportation sectors listed on the Indonesian Stock Exchange for 2016-2020. Company reports are downloaded from https://idx.co.id/ or the official company website. The data were analyzed using descriptive statistics and Partial Least Square (PLS) method. This study contributes to the literature by giving a deeper understanding of factors affecting tax avoidance and showing that sales growth, profitability, and leverage affect the company's tendency to carry out tax avoidance. The results of this study will be helpful for tax authorities who carry out tax audits of service companies engaged in the infrastructure, utilities, and transportation sectors. The tax authorities should also pay attention to the firm size, which can influence a company to practice tax avoidance.

Suggested Citation

  • Cindy & Rasinta Ria Ginting, 2022. "The Effect of Sales Growth, Profitability and Leverage on Tax Avoidance with Firm Size as Moderating Variable," Oblik i finansi, Institute of Accounting and Finance, issue 4, pages 131-138, December.
    • Handle: RePEc:iaf:journl:y:2022:i:4:p:131-138
    DOI: 10.33146/2307-9878-2022-4(98)-131-138
    as

    Download full text from publisher

    File URL: http://www.afj.org.ua/pdf/958-vpliv-zrostannya-prodazhiv-rentabelnosti-ta-kreditnogo-plecha-na-uhilennya-vid-splati-podatkiv-iz-rozmirom-firmi-yak-poserednickoyu-zminnoyu.pdf
    Download Restriction: no
    File URL: http://www.afj.org.ua/en/article/958/
    Download Restriction: no
    File URL: https://libkey.io/10.33146/2307-9878-2022-4(98)-131-138?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Sarstedt, Marko & Ringle, Christian M. & Smith, Donna & Reams, Russell & Hair, Joseph F., 2014. "Partial least squares structural equation modeling (PLS-SEM): A useful tool for family business researchers," Journal of Family Business Strategy, Elsevier, vol. 5(1), pages 105-115.
    2. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Akram, Farheen & Abrar ul haq, Muhammad, 2018. "Assessing the Effect of Managerial Power on Firm Performance through the Perceptual Lens of Executive Remuneration," MPRA Paper 100050, University Library of Munich, Germany, revised 2019.
    2. Comino-Jurado, María & Sánchez-Andújar, Sonia & Parrado-Martínez, Purificación, 2021. "Reassessing debt-financing decisions in family firms: Family involvement on the board of directors and generational stage," Journal of Business Research, Elsevier, vol. 135(C), pages 426-435.
    3. Pittino, Daniel & Barroso Martínez, Ascensión & Chirico, Francesco & Sanguino Galván, Ramón, 2018. "Psychological ownership, knowledge sharing and entrepreneurial orientation in family firms: The moderating role of governance heterogeneity," Journal of Business Research, Elsevier, vol. 84(C), pages 312-326.
    4. Daniel Magalhães Mucci & Ann Jorissen & Fabio Frezatti & Diógenes de Souza Bido, 2021. "Managerial Controls in Private Family Firms: The Influence of a Family’s Decision Premises," Sustainability, MDPI, vol. 13(4), pages 1-21, February.
    5. Yadlapalli, Aswini & Rahman, Shams & Gunasekaran, Angappa, 2018. "Socially responsible governance mechanisms for manufacturing firms in apparel supply chains," International Journal of Production Economics, Elsevier, vol. 196(C), pages 135-149.
    6. Mohammed T. Abusharbeh, 2024. "Technology-Profitability Paradox in Banking Sector: Evidence from Palestine," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(3), pages 14855-14873, September.
    7. Barbara Su, 2023. "Banking practices and borrowing firms’ financial reporting quality: evidence from bank cross-selling," Review of Accounting Studies, Springer, vol. 28(1), pages 201-236, March.
    8. Yeon‐Koo Che & Kathryn E. Spier, 2008. "Strategic judgment proofing," RAND Journal of Economics, RAND Corporation, vol. 39(4), pages 926-948, December.
    9. Ichev, Riste & Valentinčič, Aljoša, 2025. "The effect of impact investing on performance of private firms," Research in International Business and Finance, Elsevier, vol. 73(PA).
    10. Klapper, Leora F. & Love, Inessa, 2004. "Corporate governance, investor protection, and performance in emerging markets," Journal of Corporate Finance, Elsevier, vol. 10(5), pages 703-728, November.
    11. Hartarska, Valentina M. & Nadolnyak, Denis A., 2012. "Financing Constraints and Access to Credit in Post Crisis Environment: Evidence from New Farmers in Alabama," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124882, Agricultural and Applied Economics Association.
    12. Hasan, Iftekhar & Lozano-Vivas, Ana, 2002. "Organizational Form and Expense Preference: Spanish Experience," Bulletin of Economic Research, Wiley Blackwell, vol. 54(2), pages 135-150, April.
    13. Fabbri, Daniela & Menichini, Anna Maria C., 2016. "The commitment problem of secured lending," Journal of Financial Economics, Elsevier, vol. 120(3), pages 561-584.
    14. Sang Cheol Lee & Mooweon Rhee & Jongchul Yoon, 2018. "Foreign Monitoring and Audit Quality: Evidence from Korea," Sustainability, MDPI, vol. 10(9), pages 1-22, September.
    15. Lu, Yao & Zhan, Shuwei & Zhan, Minghua, 2024. "Has FinTech changed the sensitivity of corporate investment to interest rates?—Evidence from China," Research in International Business and Finance, Elsevier, vol. 68(C).
    16. DEGEORGE, François & DING, Yuan & JEANJEAN, Thomas & STOLOWY, Hervé, 2005. "Does Analyst Following Curb Earnings Management?," HEC Research Papers Series 810, HEC Paris.
    17. Xueyan Dong & Jingyu Gao & Sunny Li Sun & Kangtao Ye, 2021. "Doing extreme by doing good," Asia Pacific Journal of Management, Springer, vol. 38(1), pages 291-315, March.
    18. Gerry Gallery & Emerson Cooper & John Sweeting, 2008. "Corporate Disclosure Quality: Lessons from Australian Companies on the Impact of Adopting International Financial Reporting Standards," Australian Accounting Review, CPA Australia, vol. 18(3), pages 257-273, September.
    19. Nour El Houda Ben Amor & Mohamed Nabil Mzoughi, 2023. "Do Millennials’ Motives for Using Snapchat Influence the Effectiveness of Snap Ads?," SAGE Open, , vol. 13(3), pages 21582440231, July.
    20. Baarda, James R., 2003. "Current Law & Economics Debates: Tools for Assessing Fundamental Cooperative Changes?," 2003 Annual Meeting, October 29 31802, NCERA-194 Research on Cooperatives.

    More about this item

    Keywords

    sales growth; profitability; leverage; effective tax rate; firm size; tax avoidance;
    All these keywords.

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iaf:journl:y:2022:i:4:p:131-138. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Serhiy Ostapchuk (email available below). General contact details of provider: https://edirc.repec.org/data/iafkvua.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.