Journal of Economics and Business
ISSN 2615-3726 (Online)
ISSN 2621-5667 (Print)
Published: 17 February 2020
Analysis of the Effect of Business Strategy and Financial Distress on Tax Avoidance
Arja Sadjiarto, Sylvia Hartanto, Natalia, Stephani Octaviana
Petra Christian University, Indonesia
Download Full-Text Pdf
Keywords: Business Strategy, Corporate Tax Avoidance, Defender, Financial Distress, Prospector
In recent years, tax avoidance has been frequently discussed and has attracted the attention of the Indonesian government. Many factors affect tax avoidance, one of it is business strategy. Not only business strategies, but also financial distress can also be one of the factors causing tax avoidance. Related to the problem, in this study we would examine the impact of business strategies and financial distress of Indonesian companies to tax avoidance practices. The samples of this research were 292 companies in the manufacturing, trade and construction sectors which were listed on the Indonesia Stock Exchange in period 2015-2018 and obtained 1168 research data. This research used multiple linear regression method. Our regression results proved that the prospector business strategy has a positive impact on tax avoidance, while the defender's business strategy has a negative impact on tax avoidance. Meanwhile, related to financial distress, our results showed that financial distress has a positive impact on tax avoidance.
- Altman, E.I., & Hotchkiss, E., 2006. Corporate Financial Distress and Bankruptcy: Predict and Avoid Bankruptcy, Analyze and Invest in Distressed Debt, Third edition. Wiley, Hoboken, NJ.
- Arieftiara, D., Utama, S., Wardhani, R., & Rahayu, N. (2015). Analisis Pengaruh Strategi Bisnis Terhadap Penghindaran Pajak, Bukti Empiris Di Indonesia. Simposium Nasional Akuntansi, 18.
- Bentley, K. A., T. C. Omer, & N. Y. Sharp. (2013). Business strategy, audit fees and financial reporting irregularities. Contemporary Accounting Research, 30(2): 780–817.
- Cheng, C.S.A., Huang, H.H., Li, Y., & Stanfield, J., (2012). The effect of hedge fund activism on corporate tax avoidance. The Accounting Review, 87(5), 1493–1526.
- 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, 55(6), 81-86.
- Dunbar, A. E. & J. D. Phillips, (2001). The outsourcing of corporate tax function activities. Journal of the American Taxation Association, 23(2): 35-49.
- Ghozali, I. (2006). Aplikasi Analisis multivariate dengan program SPSS. (2nd ed.). Yogyakarta, Indonesia: Penerbit Universitas Diponegoro
- Higgins, D., Omer, T. C., & Phillips, J. D. (2015). The Influence of a Firm's Business Strategy on its Tax Aggressiveness. Contemporary Account Research, 32(2), 674-702. doi:10.1111/1911-3846.12087
- Higgins, D., Omer, T. C., & Phillips, J. D. (2011). Does a Firm’s Business Strategy Influence its Level of Tax Avoidance?. 2011 American Taxation Association Midyear Meeting: JATA Conference.
- Martinez, A. L. and Ferreira, B. A. (2019). Business strategy and tax aggressiveness in Brazil. Journal of Strategy and Management, 12(4), 522-535. https://doi.org/10.1108/JSMA-03-2019-0040
- Maulana., Marwa, T., & Wahyudi, T. (2018). The Effect of Transfer Pricing, Capital Intensity and Financial Distress on Tax Avoidance with Firm Size as Moderating Variables. Modern Economics, 11, 122-128.
- Miles, R. E., Snow, C. C., Meyer, A. D. & Coleman, H. J. Jr (1978). Organizational Strategy, Structure, and Process. Academy of Management Review, 3(3), 546-562. Doi: 10.2307/257544
- Nugroho, S. A., Firmansyah, A. (2017). Pengaruh Financial Distress, Real Earnings Management, dan Corporate Governance terhadap Tax Aggressiveness. Journal of Business Administration, 1(2), 17-36. Doi: 10.30871/jaba.v1i2.616
- Putri, R.A.H., Chariri, A. (2017). Pengaruh Financial Distress dan Good Corporate Governance terhadap Praktik Tax Avoidance pada Perusahaan Manufaktur. Diponegoro Journal of Accounting, 6(2), 1-11.
- Richardson, G., Lanis, R., Taylor, G. (2014). Financial Distress, Outside Directors and Corporate Tax Aggressiveness Spanning the Global Financial Crisis: An Empirical Analysis. Journal of Banking & Finance, 52, 112-129. Doi:
- Richardson, G., Taylor, G., Lanis R. (2015). The impact of financial distress on corporate tax avoidance spanning the global financial crisis: Evidence from Australia. Economic Modelling, 44, 44–53. https://doi.org/10.1016/j.econmod.2014.09.015
- Wahyuni, L., Fahada, R., & Atmaja, B. (2017). The Effect of Business Strategy, Leverage, Profitability and Sales Growth on Tax Avoidance. Indonesian Management and Accounting Research, 16(2), 67-80. Doi: 10.25105/imar.v16i2.4686