Financial Leverage and Idiosyncratic Risk in Indonesia: Does Integrated Reporting Matter?

Geno, Much. Rizal P.; Firmansyah, Amrie; Prakosa, Dani Kharismawan; Widyansyah, Ahmad Surya

doi:10.23969/jrak.v14i1.5172

Cited by 6 publications

(9 citation statements)

References 37 publications

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“…Harjito & Hapsari (2016) and Rajverma et al (2019) concluded that leverage, firm size, and profit before tax are proven to have a negative effect on firm risk. Leverage is a ratio that measures long-term and shortterm debt capacity to finance company assets (Geno et al, 2022). The proxy of leverage in this study is based on Firmansyah & Muliana (2018) Pretax book income is operating profit plus other income less other expenses before the applicable tax rate under tax regulations (Firmansyah & Muliana, 2018;Guenther et al, 2013).…”

Section: (2)mentioning

confidence: 99%

“…At the international level, studies that have examined the effect of variables that are associated with firm risk include corporate governance (Haider & Fang, 2016;Lenard et al, 2014;Mathew et al, 2018), c o r p o r a t e s o c i a l r e s p o n s i b i l i t y (Albuquerque et al, 2019;Nguyen & Nguyen, 2015), firm size (Rajverma et al, 2019), leverage (Rajverma et al, 2019), market-to-book (Rajverma et al, 2019) and profitability (Rajverma et al, 2019), tax aggressiveness (Guenther et al, 2013), tax risk (Guenther et al, 2013;Hutchens & Rego, 2015), and tax avoidance (Guenther et al, 2013;Hutchens et al, 2020). In Indonesia, firm risk testing has been conducted, including gender board (Hatane et al, 2019), independence of the board of directors (Hatane et al, 2019), ownership of the board of directors (Hatane et al, 2019), board size (Hatane et al, 2019), financial leverage (Geno et al, 2022;Sidauruk & Pangestuti, 2015), derivatives (Candradewi & Rahyuda, 2019;Firmansyah et al, 2020a), firm size (Sidauruk & Pangestuti, 2015), profitability (Sidauruk & Pangestuti, 2015), financial performance (Candradewi & Rahyuda, 2019), corporate governance disclosure (Candradewi & Rahyuda, 2019), liquidity (Sidauruk & Pangestuti, 2015), avoidance (Firmansyah & Muliana, 2018) and tax risk (Firmansyah & Muliana, 2018).…”

Section: Introductionmentioning

confidence: 99%

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Corporate Governance, Tax Plannings and Firm Risk: Empirical Study of Indonesian Manufacturing Companies

Febrian

Firmansyah

2022

JAB

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Many companies reduce the tax expenses to as low as possible, leading to tax planning behavior. Tax efficiency is carried out to optimize company profits through various policies. Meanwhile, implementing certain tax policies can increase the company's risk because it triggers uncertainty in cash flows and profits. This study examines the effect of tax avoidance, tax aggressiveness, and tax risk on firm risk. In addition, this study also examines the moderating role of corporate governance, testing the independent and dependent variables. The data used in this study are from manufacturing companies listed on the Indonesia Stock Exchange (IDX) during the 2016-2019 observation period, sourced from Indonesia Stock Exchange's official website, the company websites, www.finance.yahoo.com and www.bloomberg.com. This study resulted in a sample of 260 firm-years based on purposive sampling. Hypothesis testing is employed by multiple linear regression linear analysis for panel data. The results suggest that tax avoidance and tax risk are positively associated with firm risk, while tax aggressiveness is not associated with firm risk. Furthermore, this study also finds that corporate governance does not have a moderating effect in testing the independent and dependent variables. This study contributes novelty to tax planning activities testing related to firm risk, which is still rarely conducted in previous studies.

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Section: (2)mentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Corporate Governance, Tax Plannings and Firm Risk: Empirical Study of Indonesian Manufacturing Companies

Febrian

Firmansyah

2022

JAB

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“…Firm size is a scale that can be classified as large or small by looking at total assets, log size, stock market value, and others. Measurement of company size used the natural log of total assets (Geno et al, 2022).…”

Section: Controlmentioning

confidence: 99%

Forward-Looking Information Disclosure and Firm Value in the Pandemic Era

Widiastuti

Utami

Purnamasari

2022

JRAK

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The study investigates the forward-looking information disclosure (FLID), firm performance, and firm value during the COVID-19 pandemic. The population of this study was firms listed on the Indonesia Stock Exchange (IDX). The sampling methods used purposive sampling based on specific criteria. Our total sample was 478 observations. The data were analyzed based on multiple regressions utilizing the EViews program. The results of this study revealed that forward-looking information disclosure did not affect firm value. However, firm performance has a positive effect on firm value. Therefore, the interaction of firm performance and forwardlooking information positively affects firm value. During the pandemic, managers disclose more forward-looking information than before the pandemic.

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“…Meanwhile, several studies also examined similar tests using developing countries' data (Firmansyah, Sihombing, et al, 2020;Januardi & Afrianto, 2017;Kumari et al, 2017). Other financial information which is employed to examine idiosyncratic risk is earnings management (Firmansyah & Suhanda, 2021;Prakosa et al, 2022;Rajgopal & Venkatachalam, 2011;Zhou et al, 2016), leverage (Geno et al, 2022), and earnings volatility (Widyansyah et al, 2021). Furthermore, the previous examinations of idiosyncratic risk were conducted using non-financial company information such as corporate governance (Ghafoor et al, 2019), corporate social responsibility disclosure (Kong et al, 2020;Tzouvanas et al, 2020), board of commissioners (Butar Butar, 2020), and manager competence (Tan & Liu, 2016;Wu et al, 2020).…”

Section: Introductionmentioning

confidence: 99%

The Role of Integrated Reporting in Income Smoothing, Tax Avoidance, Idiosyncratic Risk – Case of Manufacturing Sector

Geno,

Firmansyah,

Prakosa

2023

aaj

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Purpose : Idiosyncratic risk directly affects investment. The failure to foresee the risk may cause investors to suffer an enormous capital loss. Thus, this study investigates the effect of corporate policies, i.e., income smoothing and tax avoidance, on idiosyncratic risk. The use of integrated reporting as moderating variable is essential in these associations. Method : The analysis includes 90 manufacturing companies listed on the Indonesia Stock Exchange from 2016 to 2020, obtaining a total sample of 450 firm-year. Multiple linear regression models for panel data are employed to test the hypotheses. Findings : Our findings suggest that tax avoidance positively correlates with idiosyncratic risk, while integrated reporting strengthens these relationships. In contrast, income smoothing is not associated with idiosyncratic risk. However, the interaction between income smoothing and integrated reporting is negatively associated with idiosyncratic risk. Our finding proves that idiosyncratic risk can be costly due to porous corporate policies. It bridges investors understanding of idiosyncratic risk and improves their foresight, allowing them to anticipate managers’ transgression. A better understanding of idiosyncratic risk may also help local tax authorities to improve compliance risk management for taxation purposes. This study demonstrates that market regulators may benefit from enhanced integrated reporting implementation by listed companies. Novelty : This study includes integrated reporting, which encourages companies to be more transparent in providing information to the public, as a moderating variable in testing the effect of income smoothing and tax avoidance on idiosyncratic risk, which are rarely used in previous references. Keywords : Idiosyncratic Risk; Income Smoothing; Tax Avoidance; Integrated Reporting; Manufacturing Company

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Financial Leverage and Idiosyncratic Risk in Indonesia: Does Integrated Reporting Matter?

Cited by 6 publications

References 37 publications

Corporate Governance, Tax Plannings and Firm Risk: Empirical Study of Indonesian Manufacturing Companies

Corporate Governance, Tax Plannings and Firm Risk: Empirical Study of Indonesian Manufacturing Companies

Forward-Looking Information Disclosure and Firm Value in the Pandemic Era

The Role of Integrated Reporting in Income Smoothing, Tax Avoidance, Idiosyncratic Risk – Case of Manufacturing Sector

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