Managerial abilities, financial reporting quality, tax aggressiveness: Does corporate social responsibility disclosure matter in an emerging market?

Download This Article

This work is licensed under a Creative Commons Attribution 4.0 International License.

Abstract

This study empirically examines the association of managerial ability and financial reporting quality (represented by accrual earnings management and real earnings management) on tax aggressiveness. Besides, this study employs corporate social responsibility disclosure as a moderating variable. The analysis was conducted on 44 manufacturing companies listed on the Indonesia Stock Exchange (IDX) selected through purposive sampling from 2014 up to 2019 so that 264 observations were obtained. This study uses two multiple-linear regression models with panel data. This study finds that managerial ability is negatively associated with tax aggressiveness. Meanwhile, accrual earnings management is positively associated with tax aggressiveness, while real earnings management is not associated with tax aggressiveness. The results also suggest that corporate social responsibility disclosure strengthens the negative association between managerial abilities and tax aggressiveness but fails to moderate the association between real earnings management and accrual earnings management with tax aggressiveness. This study shows that the Indonesian Tax Authority should formulate tax policies and incentives to stimulate companies to be more involved in sustainable activities and make excessive social responsibility disclosure.

Keywords: Tax Aggressiveness, Managerial Ability, Accrual Earnings Management, Real Earnings Management, Corporate Social Responsibility Disclosure

Authors’ individual contribution: Conceptualization — B.V. and A.F.; Methodology — B.V., A.F., A.D., and F.I.; Formal Analysis — B.V., A.F., R.A.Q., Z.A., and S.W.; Investigation — R.A.Q., Z.A., A.D., S.W., and F.I.; Writing — Original Draft — B.V. and A.F.; Writing — Review & Editing — R.A.Q., Z.A., A.D., S.W., and F.I.; Supervision — A.F., R.A.Q., and F.I.; Project Administration — B.V., Z.A., and S.W.; Funding Acquisition — A.F., R.A.Q., A.D., Z.A., F.I., and S.W.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: M40, M41, M48, M14, H26

Received: 06.10.2021
Accepted: 25.01.2022
Published online: 27.01.2022

How to cite this paper: Vito, B., Firmansyah, A., Qadri, R. A., Dinarjito, A., Arfiansyah, Z., Irawan, F., & Wijaya, S. (2022). Managerial abilities, financial reporting quality, tax aggressiveness: Does corporate social responsibility disclosure matter in an emerging market? Corporate Governance and Organizational Behavior Review, 6(1), 19–41. https://doi.org/10.22495/cgobrv6i1p2