The role of corporate governance in mitigating tax avoidance

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Abstract

This research aims to study the relationship between managerial ownership, institutional ownership, foreign ownership, board gender diversity, and independent commissioner on tax avoidance in Indonesia. The researchers use several control variables which are leverage, solvability, board size and firm size to be used as a benchmark for tax avoidance. The research sample consists of companies in the non-cyclical consumer sector listed on the Indonesian Stock Exchange (IDX). The result of the research shows that both managerial ownership and foreign ownership have a positive and significant effect on tax avoidance. While the presence of independent commissioners has a negative and significant effect on tax avoidance. Moreover, institutional ownership, board gender diversity, board size, leverage, solvency, and firm size have no effect on tax avoidance. The presence of an independent board of commissioners is crucial in preventing tax avoidance practices, whereas the inclusion of female directors does not demonstrate a reduction in tax avoidance within companies. The study holds policy implications for policymakers regarding the design of future tax systems, aiming to minimize the potential involvement in tax avoidance practices.

Keywords: Corporate Governance, Ownership Structure, Board Gender Diversity, Independent Commissioners, Tax Avoidance

Authors’ individual contribution: Conceptualization — I.S. and T.R.; Investigation — I.S.; Resources — I.S.; Writing — I.S. and T.R.

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

JEL Classification: G32, G34, G38, K34, M14

Received: 10.11.2023
Accepted: 22.11.2024
Published online: 25.11.2024

How to cite this paper: Sulfia, I., & Rusmanto, T. (2024). The role of corporate governance in mitigating tax avoidance [Special issue]. Journal of Governance & Regulation, 13(4), 236–246. https://doi.org/10.22495/jgrv13i4siart2