Financial Distress, Earnings Management, and Tax Avoidance: evidence from Indonesia

ABSTRACT: This study aims to verify the correlation between financial distress and earnings management of tax avoidance. The population in this study are primary and non-primary consumer goods companies listed on the Indonesia Stock Exchange (IDX) for the period 2019 to 2021. Sample collection was performed using a purposive sampling method, resulting in a total of 94 companies that published complete financial reports and recorded a positive value on profit before tax. This study was tested by using the Multiple Regression Analysis test. The results show that financial distress has a significant positive effect on tax avoidance, meanwhile earnings management has no significant effect on tax avoidance. This research used several control variables as well, which are profitability, leverage, liquidity, sales growth, firm size, and the results show that profitability and firm size has a significant negative effect on tax avoidance, leverage has a significant positive effect on tax avoidance, while liquidity, sales growth have no significant effect on tax avoidance.

KEYWORDS : tax avoidance, financial distress, earning management A