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ABSTRACT
The aim of this research is to examine the effect of the tax avoidance on the cost of debt with the institutional ownership as moderating variable; the listed firms of the food and beverage industry in Indonesian Stock Exchange have been selected with this respect. The study examined a secondary data from 35 companies during 4 years, 2009 to 2012. The results show that (1) tax avoidance can impact positively and significantly on the cost of debt; (2) shareholders activity didn't have moderating relationship with the tax avoidance and cost of debt nexus. It is concluded that shareholder's activity as moderating variable give weak influence on the relation between tax avoidance and cost of debt.
JEL Classifications: H24; H26; H71.
Keywords: Tax Avoidance; Cost of Debt; Institutional Ownership; Consumer Goods.
(ProQuest: ... denotes formulae omitted.)
1. INTRODUCTION
Source of corporate funding can be obtained through several ways such as by borrowing from creditors (debt) and loans from shareholders to deposit in the form of capital for the company (equity). The choice of debt and capital as a source of funding is an important decision affecting the company. The use of debt financing to be considering the possibility of financial distress, the company will limit the amount of debt. While the optimal capital structure wills weigh the advantages and disadvantages of the tax shield because of the potential financial distress. From the government's point of view, an income tax is a very important part of state revenues (Katircioglu, 2010; Fethi et al., 2006; 2004). However, from the perception of taxpayers, especially companies, tax is a burden, not only for companies, but also to stakeholders. As those who are skeptical in paying taxes to the tax authorities, the management will engage in aggressive tax planning strategies to minimize, eliminate or defer tax obligations.
Taxation aspects is the main factor be considered as tax companies is a significant burden on the company. The main objective companies are optimizing profits, both domestic and multinational companies seek to minimize the tax burden by leveraging existing tax provisions. The owner of the company will encourage management to take action to reduce the burden of aggressive tax taxes that arise (Chen, et al 2010). The purpose of earnings management is...