TY - JOUR
T1 - Determinants of the complementary level of financial and tax aggressiveness
T2 - A cross-country study
AU - Rachmawati, Nurul Aisyah
AU - Utama, Sidharta
AU - Martani, Dwi
AU - Wardhani, Ratna
N1 - Publisher Copyright:
© 2019 Inderscience Enterprises Ltd.
PY - 2019/1/1
Y1 - 2019/1/1
N2 - This study aims to examine the factors affecting the complementary level of financial and tax aggressiveness. This research considers the diversity of cost and benefit faced by firms when presenting financial and tax reporting aggressively at the same time. Our proxies for cost (the level of detection risk) are country-level variables, namely book-tax conformity and law enforcement. Meanwhile, our proxy for benefit is the financial constraint of a firm. In this study, we develop a new measure of financial constraint which is more comprehensive. Using a sample of listed firms in East Asia and Europe from 2014 to 2016, we find that firms with a higher level of detection risk (such as higher book-tax conformity or stronger law enforcement) tend to engage in a lower complementary level of financial and tax aggressiveness, in accordance with the developed hypothesis. We also find that firms tend to engage in a higher complementary level of financial and tax aggressiveness if they will derive significant benefit from aggressive financial and tax reporting activities. These results suggest that firm and country characteristics influence managers' decisions to present financial statements and tax reporting aggressively at the same time or not.
AB - This study aims to examine the factors affecting the complementary level of financial and tax aggressiveness. This research considers the diversity of cost and benefit faced by firms when presenting financial and tax reporting aggressively at the same time. Our proxies for cost (the level of detection risk) are country-level variables, namely book-tax conformity and law enforcement. Meanwhile, our proxy for benefit is the financial constraint of a firm. In this study, we develop a new measure of financial constraint which is more comprehensive. Using a sample of listed firms in East Asia and Europe from 2014 to 2016, we find that firms with a higher level of detection risk (such as higher book-tax conformity or stronger law enforcement) tend to engage in a lower complementary level of financial and tax aggressiveness, in accordance with the developed hypothesis. We also find that firms tend to engage in a higher complementary level of financial and tax aggressiveness if they will derive significant benefit from aggressive financial and tax reporting activities. These results suggest that firm and country characteristics influence managers' decisions to present financial statements and tax reporting aggressively at the same time or not.
KW - Book-tax conformity
KW - Complementary level of aggressiveness
KW - Financial aggressiveness
KW - Financial constraint
KW - Law enforcement
KW - Tax aggressiveness
UR - http://www.scopus.com/inward/record.url?scp=85066107418&partnerID=8YFLogxK
U2 - 10.1504/IJMFA.2019.099772
DO - 10.1504/IJMFA.2019.099772
M3 - Article
AN - SCOPUS:85066107418
SN - 1753-6715
VL - 11
SP - 145
EP - 166
JO - International Journal of Managerial and Financial Accounting
JF - International Journal of Managerial and Financial Accounting
IS - 2
ER -