Abstract
This study aims to verify the correlation between financial distress and earnings management of tax aggressiveness moderated by corporate governance. This study uses a population of manufacturing companies that publish their financial statement on the Indonesia Stock Exchange from 2017 until 2018. Sample collection was performed using a purposive sampling method, resulting in a total of 212 populations that published complete financial reports. This study was tested by using the Multiple Regression Analysis test. This research gave empirical proofs that financial distress and real earnings management positively influenced the tax aggressiveness was supported, the proportion of independent commissioners weakened the financial distress and negatively impacted the tax aggressiveness was supported, the total audit committees weakened the financial distress and negatively influenced the tax aggressiveness was not supported, the proportion of independent commissioners and total audit committees weakened the real earnings management and negatively affected the tax aggressiveness was not supported
Highlights
Financial distress is an early symptom of bankruptcy due to a decline in financial conditions experienced by a company (Sulastri and Yane, 2018)
The results showed that when the company experienced financial distress, management usually looked for a quick fund source with unforeseen risks
Based on the results, it was known that the regulations made by regulators in good corporate governance related to the existence of independent commissioners and audit committees independently and not as moderation variable in a go public company affected tax aggressiveness in the company
Summary
Financial distress is an early symptom of bankruptcy due to a decline in financial conditions experienced by a company (Sulastri and Yane, 2018). When a company experiences financial distress, management will try to maintain its business sustainability by increasing profits, assuming that investors will remain interested so the company's operational activities can continue. For this reason, the company will try to manipulate the income so that the tax paid is smaller, if this is done continuously, the company will be considered as tax aggressiveness. The effect of financial distress on tax aggressiveness is still a matter of debate among researchers. Putri and Anis (2017) found that financial distress have a positive effect on tax avoidance. If the risk of bankruptcy is high enough, the company will aggressively practice tax avoidance and ignore the risk of audits conducted by the tax authorities
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