Influence of Ceo Over Confidence, Gender Diversity and Profitability on Corporate Tax Avoidance: Empirical Study on Manufacturing Companies Listed on the Indonesia Stock Exchange

Abstract

This research aims to determine the influence of individual and company characteristics on tax avoidance by examining and analyzing the impact of CEO overconfidence, gender diversity, and profitability on corporate tax avoidance. The rationale of this research is that there is still a lack of research, the authors identify the relationship between CEO overconfidence, gender diversity, and profitability using tax avoidance measurement, i.e., cash effective tax rate (CETR) followed by control variables of sales growth and capital intensity. This study used secondary data with entire manufacturing companies listed on Indonesia Stock Exchange for 2017-2019. The sample was determined using the purposive sampling method and obtained 96 samples. The analysis method used in this research is panel data regression with corporate tax avoidance as the dependent variable and CEO overconfidence, gender diversity, and profitability as independent variables. This research indicates that profitability positively affects corporate tax avoidance, while CEO overconfidence and gender diversity have no significant effect on corporate tax avoidance.

Tax Avoidance: The Role of Managerial Ability and CEO Overconfidence

“…In contrast to research (Carrer & Slavov, 2021;Sugiono & Anggraeny, 2022), this study is not in line with research (Hsieh et al, 2018) which shows that companies are more likely to engage in tax avoidance when they have an overconfident CEO and an overconfident CFO. This is because there is a common belief in the company's business situation and because there are risks that they are willing to bear due to tax avoidance actions, thus enabling them to work together in tax avoidance actions.…”

“…This study supports research (Carrer & Slavov, 2021;Sugiono & Anggraeny, 2022) which shows that CEO overconfidence has no influence on corporate tax avoidance. An increase or decrease in CEO overconfidence does not affect the company's tax avoidance activities.…”

“…Other factors such as companies carrying out CSR activities can influence CEO overconfidence not to be involved in tax avoidance because of a culture of morality, where companies not only prioritize the interests of shareholders, but also think about the company's survival in the future. Companies think about the benefits of their business activities on the economy, society and the surrounding environment, so they choose to avoid the risks of tax avoidance (Sugiono & Anggraeny, 2022).…”

“…The CEO as the core of corporate decision-making can influence all aspects of a company's financing, investment, and operations (Gao & Han, 2020). Psychological factors that include overconfidence are one of the characteristics possessed by CEOs that can encourage these actions (Sugiono & Anggraeny, 2022). Personal traits that exist in top executives will be reflected in organizational behavior and CEO overconfidence has influence in setting company policies and strategic decisions, one of which is corporate tax policy (Hsieh et al, 2018).…”

“…Engaging in tax avoidance measures can help overconfidence CEOs provide more financial resources in financing their investment projects by reducing the company's tax burden (Hsieh et al, 2018). Overconfidence behavior possessed by executives encourages them to take tax avoidance actions to reduce tax burden and cash flow to pay taxes, allowing companies to divert their money for more profitable things, such as financing their investments and business expansion (Sugiono & Anggraeny, 2022).…”