The Effect of Both Earnings Management and Tax Planning To The Value of The Company With Corporate Governance As Variable Moderating

Nia Suryani,Djuminah Djuminah

doi:10.47312/aar.v2i01.66

Abstract

The primary objective of this study is to determine the impact of both earnings management and tax planning towards the value of the firm, corporate governance is measured by using score CGPI as moderating variable. This study uses purposive sampling method that generates 40 samples of company listings on the Indonesia Stock Exchange (IDX) and registered in participation Corporate Governance Perception Index (CGPI) during 2012 until 2015. Based on the test result of regression analysis it showed that earnings management practices which is measured by using discretionary accrual shows regression coefficients of 2,557 with p-value of 0,015 or p-value is below 0,05, so it has negative impact to the value of the firm, then it can be concluded that the existence of earnings management can reduce the value of the firm. Tax planning activity is measured by using Cash_ETR which shows regression coefficients -0.956 with a p-value of 0,005 or p-value is below 0,05, which means it gives a negative impact to the value of the firm, so it can be concluded that the higher level of tax planning by management will have an impact on the declining value of the firm. Furthermore, corporate governance which is measured using the CGPI’s score is not a moderating variable between earnings management and value of the firm, showed by p-value of 0,090, whereas the relationships of tax planning and value of the firm can be moderated by corporate governance, showed by p-value of 0,024. Keywords: CGPI’s Score, Corporate Governance, Discretionary Accrual, Earnings Management, Tax Planning, Value of the Firm

Highlights

The purpose of the financial statements is to provide information pertaining to financial position, firm performance, and changes in financial position that benefit a large number of users in economic decision making (Kieso, Weygant and Warfield, 2013)
Financial statements are often misused by management by making changes in accounting methods used, thereby impacting the amount of earnings available on financial statements that are often known as earnings management, as well as management actions to minimize or make the tax burden as low as possible, Or often known as tax planning
The research population is all companies that published annual reports in Indonesia Stock Exchange (IDX) during the period 2013 to 2015 and they are included in the rating Corporate Governance Perception Index (CGPI) which is a survey conducted by The Indonesian Institute for Corporate Governance (IICG)

Summary

Introduction

The purpose of the financial statements is to provide information pertaining to financial position, firm performance, and changes in financial position that benefit a large number of users in economic decision making (Kieso, Weygant and Warfield, 2013). According to the National Association of Certified Fraud Examiners, earnings management as a deliberate mistake or negligence in making financial statements regarding material facts and accounting data, is misleading when all information is used in making judgments that will lead people to read them to change their opinions or decisions. High corporate value can increase prosperity for shareholders so they will invest their capital into the company's stock (Haruman, 2008). Another way that can be used by companies to increase the value of the company is tax planning

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