Are Tax Avoidance and Earnings Management Link to Cost of Debt?

Abstract

The company's debt cost shows the level of creditor confidence in its ability to repay its loans. Creditors charge a higher rate of return on debt to the company to compensate for the risk of the number of receivables being unable to be recovered by the company. This study examines empirical evidence of the effect of tax avoidance and earnings management on the cost of debt. This study uses data from mining companies listed on the Indonesia Stock Exchange (IDX) from 2018 to 2020. The data is obtained from www.idx.co.id and the company's official website. Based on purposive sampling, the number of samples used in the study amounted to 89 observations. Analysis of the data in this study using multiple linear regression tests for cross-section data. The test results suggest that tax avoidance is not associated with cost of debt, while earnings management is positively associated with cost of debt. This research indicates that the Indonesia Financial Services Authority can improve policies on credit applications by companies listed on the Exchange to maintain the company's financial health.Keywords: Cost of debt;Earnings quality; Tax avoidance.AbstrakBiaya utang yang ditanggung perusahaan menunjukkan tingkat kepercayaan kreditor atas kemampuan perusahaan dalam mengembalikan pinjamannya. Kreditor mengenakan tingkat pengembalian utang yang lebih tinggi kepada perusahaan untuk mengkompensasi risiko atas jumlah piutang yang tidak mampu dikembalikan oleh perusahaan. Penelitian ini bertujuan untuk menguji bukti empiris pengaruh penghindaran pajak dan manajemen laba terhadap biaya utang. Penelitian ini menggunakan data perusahaan pertambangan yang terdaftar di Bursa Efek Indonesia periode 2018 sampai dengan 2020. Data penelitian diperoleh dari www.idx.co.id dan situs resmi perusahaan. Berdasarkan purposive sampling, jumlah sampel yang digunakan dalam penelitian berjumlah 89 observasi. Analisis data dalam penelitian ini menggunakan uji regresi linier berganda untuk data cross section. Hasil pengujian menunjukkan bahwa penghindaran pajak tidak berpengaruh terhadap biaya utang, sedangkan manajemen laba berpengaruh positif terhadap biaya utang. Penelitian ini mengindikasikan bahwa Bagi Otoritas Jasa Keuangan (OJK) dapat meningkatkan kebijakan atas pengajuan kredit yang dilakukan oleh perusahaan listed di Bursa untuk dalam rangka menjaga kesehatan keuangan perusahaan.Kata Kunci: Biaya utang; Kualitas laba, Penghindaran pajak.

The Influence of Credit Risk on Company Earnings Management (Empirical Study of Banking Companies Listed on the IDX)

“…The existence of earnings management carried out by companies This will cause the information obtained by stakeholders to be biased, so that decisions made by stakeholders will be incorrect. Earnings persistence is determined by accrual and cash flow components (Ustadza and Firmansyah 2023).…”

The Moderating Role of Sustainability Disclosure in the Association between Tax Avoidance and Cost of Debt

“…Companies with a high risk have a higher cost of debt, so assessing the cost of debt provides the firm and creditors with an understanding of the company's risk compared to other companies (Bui et al, 2023). The qualities of the debt issuer influence the cost of debt for a corporation because they impact bankruptcy risk, agency expenses, and information asymmetry issues (Ustadza & Firmansyah, 2023).…”

“…Research has been conducted on the factors that influence the cost of debt. The factors employed to test the cost of debt include tax avoidance (Arianti, 2017;Daffa et al, 2022;Dewi & Ardiyanto, 2020;Heryawati et al, 2018;Hutabarat & Firmansyah, 2022;Kovermann, 2018;Manullang et al, 2020;Sherly et al, 2016;Shin & Woo, 2018;Ustadza & Firmansyah, 2023;D. K. Wardani & Rumahorbo, 2018;S.…”

“…K. Wardani & Rumahorbo, 2018), tax risk (Dewi & Ardiyanto, 2020), firm age (Daffa et al, 2022), leverage (Daffa et al, 2022), asymmetric information (Jasman, 2016) and audit quality (Ratnasari, 2014;Widyastuti & Utomo, 2020). Furthermore, earnings management Kim, 2020;Shen & Huang, 2013;Ustadza & Firmansyah, 2023) and sustainability disclosure (Hutabarat & Firmansyah, 2022) were employed to examine cost of debt.…”

“…Arianti (2017), Daffa et al (2022), Heryawati et al (2018) and Kovermann, 2018) suggested that tax avoidance is inversely associated with the cost of debt. Furthermore, Dewi & Ardiyanto (2020), Manullang et al (2020), Ustadza & Firmansyah (2023), and S. L. Wardani & Ruslim (2020) suggested that tax avoidance is not associated with cost of debt. Because prior studies contained inconsistencies, assessing tax avoidance on loan costs is required.…”