THE ROLE OF CORPORATE TRANSPARENCY IN MODERATING THE INFLUENCE OF LEVERAGE AND TAX AVOIDANCE ON FIRM VALUE IN THE REAL ESTATE AND PROPERTY SECTOR IN INDONESIA

Suhono Sohono; Ajeng Eka Putri; Nahruddien Akbar M; Endang Mahpudin; Eva Maria Sulastri

doi:10.24198/sosiohumaniora.v26i3.58548

THE ROLE OF CORPORATE TRANSPARENCY IN MODERATING THE INFLUENCE OF LEVERAGE AND TAX AVOIDANCE ON FIRM VALUE IN THE REAL ESTATE AND PROPERTY SECTOR IN INDONESIA

Suhono Sohono, Ajeng Eka Putri, Nahruddien Akbar M, Endang Mahpudin, Eva Maria Sulastri

Abstract

Increasing scrutiny on the impact of leverage and tax evasion on business value, particularly in the real estate and property sectors, has become a significant phenomenon. Incorporating corporate transparency as a moderating variable, this research aims to provide empirical data on these critical financial dynamics. The population comprises companies listed on the Indonesia Stock Exchange during the 2019–2021 period, with a sample of ten companies selected based on pre-established criteria. Data collection involved quantitative methods, including descriptive statistical analysis, multiple regression, moderation regression, and traditional assumption tests. Hypothesis testing was conducted using both concurrent and partial experiments. The findings reveal significant relationships between firm value and tax avoidance, leverage and firm value, and business transparency. Notably, while corporate transparency effectively moderates the relationship between leverage and firm value, it does not have the same effect on the relationship between tax avoidance and firm value. These results emphasize the importance of leveraging transparency to enhance business value, suggesting that companies should prioritize transparent practices to mitigate the adverse effects of tax evasion. Theoretically, this research contributes to the understanding of corporate finance by illustrating how corporate transparency influences the dynamics between leverage, tax avoidance, and firm value. Practically, it highlights the necessity for property and real estate companies to adopt more transparent financial practices to foster investor confidence and enhance market value. Future research could explore additional factors influencing these relationships for deeper insights into corporate finance dynamics in Indonesia.

Keywords

leverage; tax evasion; firm value; corporate transparency; real estate

Full Text:

PDF

References

Akhmadi, A., & Robiyanto, R. (2020). The Interaction Between Debt Policy, Dividend Policy, Firm Growth, and Firm Value. Journal of Asian Finance, Economics and Business, 7(11), 699–705. https://doi.org/10.13106/jafeb.2020.vol7.no11.699

Allcock, D. (2018). The “invisible” hand: views from UK institutional investors. Corporate Governance (Bingley), 18(6), 1074–1088. https://doi.org/10.1108/CG-11-2017-0264

Asyik, N. F., Agustia, D., & Muchlis, M. (2023). Valuation of financial reporting quality: is it an issue in the firm’s valuation? Asian Journal of Accounting Research, 8(4), 387–399. https://doi.org/10.1108/AJAR-08-2022-0251

Blondel, C., & Evrard, E. (2023). Incomplete justice is no justice: Learning from the neoliberal and elitist planning experiences of Euralens and EPA Alzette-Belval. Spatial Justice and Cohesion: The Role of Place-Based Action in Community Development, 183–204. https://doi.org/10.4324/9781003229681-14

Brigham, E., & Houston, J. (2018). Fundamentals of Financial Management. In Health Care Management Review (Vol. 2, Issue 4). Cengage Learning. https://doi.org/10.1097/00004010-197702040-00014

Campello, M., & Graham, J. R. (2013). Do stock prices influence corporate decisions? Evidence from the technology bubble. Journal of Financial Economics, 107(1), 89–110. https://doi.org/10.1016/j.jfineco.2012.08.002

Chernova, Z. V. (2023). Methodological Aspects of Expert Interviews: Approaches, Opportunities, and Limitations. Monitoring Obshchestvennogo Mneniya: Ekonomicheskie i Sotsial’nye Peremeny, 5(5), 74–90. https://doi.org/10.14515/monitoring.2023.5.2418

Coron, C. (2020). What does “gender equality” mean? Social representations of gender equality in the workplace among French workers. Equality, Diversity and Inclusion, 39(8), 825–847. https://doi.org/10.1108/EDI-06-2019-0185

Dakua, S. (2019). Effect of determinants on financial leverage in Indian steel industry: A study on capital structure. International Journal of Finance and Economics, 24(1), 427–436. https://doi.org/10.1002/ijfe.1671

DeAngelo, H., Gonçalves, A. S., & Stulz, R. M. (2022). Leverage and Cash Dynamics. Review of Finance, 26(5), 1101–1144. https://doi.org/10.1093/rof/rfac043

Dunlop, N., Indulska, J., & Raymond, K. (2003). Methods for conflict resolution in policy-based management systems. Proceedings - 7th IEEE International Enterprise Distributed Object Computing Conference, 2003-January(January), 98–109. https://doi.org/10.1109/EDOC.2003.1233841

Dykusova, A. G., Yarkova, T. A., & Kolesnikova, T. V. (2021). Crowdinvesting as an Alternative Way to Invest in Real Estate. IOP Conference Series: Earth and Environmental Science, 666(6). https://doi.org/10.1088/1755-1315/666/6/062111

Dyreng, S. D., Hanlon, M., & Maydew, E. L. (2019). When does tax avoidance result in tax uncertainty? Accounting Review, 94(2), 179–203. https://doi.org/10.2308/accr-52198

Eriksson, K. E., & Kolar, M. C. (1985). Microbial Degradation of Chlorolignins. Environmental Science and Technology, 19(11), 1086–1089. https://doi.org/10.1021/es00141a011

Feregrino, J., Espinosa-Cristia, J. F., Lay, N., & Leyton, L. (2022). Inappropriate Corporate Strategies: Latin American Companies That Increase Their Value by Short-Term Liabilities. International Journal of Financial Studies, 10(4). https://doi.org/10.3390/ijfs10040100

Gao, Y., & Jin, S. (2022). Corporate Nature, Financial Technology, and Corporate Innovation in China. Sustainability (Switzerland), 14(12), 1–22. https://doi.org/10.3390/su14127162

Geyer-Klingeberg, J., Hang, M., & Rathgeber, A. (2021). Corporate financial hedging and firm value: a meta-analysis. European Journal of Finance, 27(6), 461–485. https://doi.org/10.1080/1351847X.2020.1816559

Gutiérrez Brito, J., Callejo Gallego, M. J., & Agudo Arroyo, Y. (2022). Information transparency in the social media communications of public institutions. Doxa Comunicacion, 2022(34), 103–120. https://doi.org/10.31921/doxacom.n34a903

Hennes, K. M., Leone, A. J., & Miller, B. P. (2014). Determinants and market consequences of auditor dismissals after accounting restatements. Accounting Review, 89(3), 1051–1082. https://doi.org/10.2308/accr-50680

Herdinata, C., Pranatasari, F. D., & Santoso, W. (2024). Factors affecting financial performance in companies based on big data analytics. Uncertain Supply Chain Management, 12(1), 159–166. https://doi.org/10.5267/j.uscm.2023.10.008

Hist, M. (2015). 1950-60년대 한국 제약산업과 일반의약품 시장의 확대 *. 749–782.

Jihadi, M., Vilantika, E., Hashemi, S. M., Arifin, Z., Bachtiar, Y., & Sholichah, F. (2021). The Effect of Liquidity, Leverage, and Profitability on Firm Value: Empirical Evidence from Indonesia. Journal of Asian Finance, Economics and Business, 8(3), 423–431. https://doi.org/10.13106/jafeb.2021.vol8.no3.0423

Kang, W., & Wang, J. (2021). Corporate tax effects of economic policy uncertainty. Accounting and Finance, 61(S1), 2577–2600. https://doi.org/10.1111/acfi.12677

Khan, S. U. (2022). Financing constraints and firm-level responses to the COVID-19 pandemic: International evidence. Research in International Business and Finance, 59(August 2021), 101545. https://doi.org/10.1016/j.ribaf.2021.101545

Khorasgani, A. M., & Villalobos, M. H. (2023). Mindscape and Its Effect on Cities’ Sustainability: A Case Study of Bronzeville Neighborhood — Chicago. Chinese Journal of Urban and Environmental Studies, 11(3). https://doi.org/10.1142/S2345748123500161

Magistretti, S., Sanasi, S., Dell’Era, C., & Ghezzi, A. (2023). Entrepreneurship as design: A design process for the emergence and development of entrepreneurial opportunities. Creativity and Innovation Management, 32(1), 5–21. https://doi.org/10.1111/caim.12529

Martínez, M. R., Ibáñez, P. C., & Campillo, J. P. (2021). La predicción del fracaso empresarial de las cooperativas españolas. Aplicación del Algoritmo Extreme Gradient Boosting. In CIRIEC-Espana Revista de Economia Publica, Social y Cooperativa (Vol. 101). https://doi.org/10.7203/CIRIEC-E.101.15572

Martinez, R., & Graf, K. (2016). Thesis supervisors as literacy brokers in Brazil. Publications, 4(3), 1–10. https://doi.org/10.3390/publications4030026

Martinez, R. J., & Janney, J. J. (2015). Market reactions to corporate sponsorships of European football kits: The moderating effects of firm congruence. Journal of Sport Management, 29(2), 211–222. https://doi.org/10.1123/JSM.2014-0123

Mase, B. (2009). The impact of name changes on company value. Managerial Finance, 35(4), 316–324. https://doi.org/10.1108/03074350910935812

Mauer, D. C., Villatoro, N., & Zhang, Y. (2022). Brand equity and corporate debt structure. Journal of Business Finance and Accounting, 49(7–8), 1077–1112. https://doi.org/10.1111/jbfa.12597

McBarnet, D. (1992). Legitimate rackets: Tax evasion, tax avoidance, and the boundaries of legality. The Journal of Human Justice, 3(2), 56–74. https://doi.org/10.1007/BF02619290

Miragliotta, G., Sianesi, A., Convertini, E., & Distante, R. (2018). Data driven management in Industry 4.0: a method to measure Data Productivity. IFAC-PapersOnLine, 51(11), 19–24. https://doi.org/10.1016/j.ifacol.2018.08.228

Nasution, A. A. (2019). Analysis of Corporate Governance Effect and Characteristics of Companies on the Existence of Risk Management Committee. IOP Conference Series: Materials Science and Engineering, 648(1). https://doi.org/10.1088/1757-899X/648/1/012001

Neldi, M., Hady, H., Elfiswandi, & Lusiana. (2023). the Determinants of Price Earning Ratio: Evidence From Indonesia. Journal of Law and Sustainable Development, 11(4), 1–21. https://doi.org/10.55908/SDGS.V11I4.1003

Nguyen, T. N., Nguyen, N. T., & Van Nguyen, C. (2019). A study on the impact of the factors reflect solvency to the bankruptcy risk of real estate companies: Evidence from Vietnam stock exchange. Management Science Letters, 9(11), 1773–1782. https://doi.org/10.5267/j.msl.2019.6.013

Omar, A. Bin, Huang, S., Salameh, A. A., Khurram, H., & Fareed, M. (2022). Stock Market Forecasting Using the Random Forest and Deep Neural Network Models Before and During the COVID-19 Period. Frontiers in Environmental Science, 10(July), 1–10. https://doi.org/10.3389/fenvs.2022.917047

Ozturk, H., & Karabulut, T. A. (2020). Impact of financial ratios on technology and telecommunication stock returns: Evidence from an emerging market. Investment Management and Financial Innovations, 17(2), 76–87. https://doi.org/10.21511/imfi.17(2).2020.07

Palan, R., & Phillips, R. (2022). Arbitrage power and the disappearing financialized firm. Finance and Society, 8(1), 22–41. https://doi.org/10.2218/finsoc.7125

Pérez, C. C., Bolívar, M. P. R., & Hernández, A. M. L. (2008). E-Government process and incentives for online public financial information. Online Information Review, 32(3), 379–400. https://doi.org/10.1108/14684520810889682

Reypens, C., & Levine, S. S. (2018). Behavior in behavioral strategy: Capturing, measuring, analyzing. Advances in Strategic Management, 39, 221–246. https://doi.org/10.1108/S0742-332220180000039016

Schnackenberg, A. K., Tomlinson, E., & Coen, C. (2021). The dimensional structure of transparency: A construct validation of transparency as disclosure, clarity, and accuracy in organizations. In Human Relations (Vol. 74, Issue 10). https://doi.org/10.1177/0018726720933317

Shin, Y., & Park, J. (2022). Differences in Tax Avoidance According to Corporate Sustainability with a Focus on Delisted Firms. Sustainability (Switzerland), 14(11). https://doi.org/10.3390/su14116648

Stiglitz, J. E. (2002). Participation and development: Perspectives from the comprehensive development paradigm. Review of Development Economics, 6(2), 163–182. https://doi.org/10.1111/1467-9361.00148

Toumi, F., Bouraoui, M. A., & Khlif, H. (2022). National culture and tax avoidance: a quantile regression analysis. Arab Gulf Journal of Scientific Research, 40(2), 196–211. https://doi.org/10.1108/AGJSR-05-2022-0047

West, A. (2018). Multinational Tax Avoidance: Virtue Ethics and the Role of Accountants. Journal of Business Ethics, 153(4), 1143–1156. https://doi.org/10.1007/s10551-016-3428-8

DOI: https://doi.org/10.24198/sosiohumaniora.v26i3.58548