Corporate Governance, Earnings Management and Tax Management

Abstract

Tax is undeniably essential for a country and also a corporation. Both parties have a similar interest of tax. For a country it is its source of income, while for a corporation tax will reduce its net income. Therefore, sometimes corporation use earnings management practice to control its income which will impacted tax in the same time. Previous research suggested that there is significant impact of corporate governance to corporate earnings management and corporate tax management. In this research we are focusing on number of board, number of independent board and board compensation disclosure as corporate governance proxy. We use discretionary accrual to measure earnings management, and effective tax rate as tas management measurement. Our finding show that there is significant impact of corporate governance to earnings management and tax management.