Political connections, investment opportunity sets, tax avoidance: does corporate social responsibility disclosure in Indonesia have a role?

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Abstract

This study aims to obtain empirical evidence of the effect of political connections and investment opportunity sets on tax avoidance. In addition, the use of corporate social responsibility in this study as a moderating variable aims to examine the implementation of sustainability by companies, which is a global issue of concern to many parties today. Corporate social responsibility has rarely been used in previous studies as a moderating variable in examining the relationships between investment opportunity sets and tax avoidance and political connections and tax avoidance. This study analyzed 42 manufacturing companies listed on the Indonesia Stock Exchange from 2014 to 2019, selected through a purposive sampling method to produce 252 observations. This study used a quantitative method with two-panel data regression models, namely the model and without moderation. The results suggest that political connections and investment opportunity sets positively affect tax avoidance. Meanwhile, corporate social responsibility disclosure can weaken the positive effect of political connections and investment opportunity sets on tax avoidance. This study indicates that the Indonesia Tax Authority should include sustainability issues in refining existing tax policies.

Abstract

Political connections; Investment opportunity sets; Tax avoidance; Sustainability.

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The moderator-mediator variable distinction in social psychological research: conceptual, strategic, and statistical considerations.

Reuben M. Baron, David A Kenny (1986)

In this article, we attempt to distinguish between the properties of moderator and mediator variables at a number of levels. First, we seek to make theorists and researchers aware of the importance of not using the terms moderator and mediator interchangeably by carefully elaborating, both conceptually and strategically, the many ways in which moderators and mediators differ. We then go beyond this largely pedagogical function and delineate the conceptual and strategic implications of making use of such distinctions with regard to a wide range of phenomena, including control and stress, attitudes, and personality traits. We also provide a specific compendium of analytic procedures appropriate for making the most effective use of the moderator and mediator distinction, both separately and in terms of a broader causal system that includes both moderators and mediators.