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http://dx.doi.org/10.13106/jafeb.2022.vol9.no2.0103

Tax Avoidance and the Readability of Financial Statements: Empirical Evidence from Indonesia  

PRATAMA, Bima Yoga (Department of Accounting, Faculty of Economics, Universitas Airlangga)
NARSA, Niluh Putu Dian Rosalina Handayani (Department of Accounting, Faculty of Economics, Universitas Airlangga)
PRANANJAYA, Kadek Pranetha (Department of Accounting, Universitas Hayam Wuruk Perbanas)
Publication Information
The Journal of Asian Finance, Economics and Business / v.9, no.2, 2022 , pp. 103-112 More about this Journal
Abstract
This study aims to obtain empirical evidence regarding the link between tax avoidance (TA) and the readability of financial statements. This is a quantitative research using Ordinary Least Squares regression analysis which is then processed using STATA 14.0. A total of 278 companies listed on the Indonesia Stock Exchange during the period 2017-2019 is the data of this study. In detecting TA in a company, this study uses the ETR and CashETR and for the measurement of financial statement readability, this study uses gunning fog index and length of the document. The findings of this study suggest that tax avoidance and clear financial statements are mutually exclusive in the sense that when tax avoidance is practiced, companies will tend to conceal the information conveyed by financial statements. In other words, it is concluded that the more a company engages in tax avoidance, the lower the readability of the company's financial statements. This study provides in-depth evidence that tax avoidance is indirectly related to the disclosure of information by the company. Users of financial statements will realize that the company seeks to make disclosures that are in their best interests to avoid their tax avoidance strategy being detected.
Keywords
Effective Tax Rate; Financial Statement Readability; Gunning Fog Index; Length of Document; Tax Avoidance;
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Times Cited By KSCI : 4  (Citation Analysis)
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