The Effect of Thin Capitalization and Fixed Asset Intensity on Tax Avoidance with Institutional Ownership as a Moderation Variable

Abstract

In this study, the authors are interested in examining how the Thin Capitalization and fixed asset intensity influence tax avoidance with Institutional Ownership as a moderating variable. Population of all manufacturing companies in the consumer industry sector listed on the Indonesia Stock Exchange from 2018 to 2021 which found 192 samples, according to the criteria needed in this study that were sampled for 2018 to 2021. The results that Thin Capitalization has a positive effect on tax avoidance, fixed asset intensity has a positive effect on tax avoidance. For the moderating variable, Institutional Ownership is not able to weaken the effect of Thin Capitalization on tax avoidance and Institutional Ownership is not able to weaken the effect of fixed asset intensity on tax avoidance

Does Institutional Ownership Moderating Tax Avoidance? An Empirical Analysis In Indonesian List Company

“…Shareholders and management must balance maximising value creation while adhering to ethical and legal tax practices. Effective agency theory-based governance can help ensure that tax avoidance strategies do not undermine the company's long-term sustainability or conflict with shareholders' interests (Arifah & Arieftiara, 2021). It reinforces the importance of transparent communication, accountability, and alignment with the company's overall objectives, as guided by agency theory principles, to maintain a healthy and productive relationship between shareholders and management in the context of tax management practices (Furlotti & Mazza, 2020).…”