Do country characteristics affect the complementary level of financial and tax aggressiveness?

Nurul Aisyah Rachmawati, Sidharta Utama, Dwi Martani, Ratna Wardhani

Research output: Contribution to journalArticlepeer-review

Abstract

This study aims to examine whether two country characteristics—book-tax conformity and law enforcement—affect the complementary level of financial and tax aggressiveness. Previous studies have produced inconclusive results for the relationship between financial and tax aggressiveness. This study fills the gap by examining the country-level determinants of the complementary level of financial and tax aggressiveness. It also develops a new measure of the complementary level of financial and tax aggressiveness. Using a sample of firms from 15 countries in East Asia and Europe from 2014 to 2016, this study finds that firms from countries with higher book-tax conformity and stronger law enforcement tend to have a lower complementary level of financial and tax aggressiveness. In an additional test, this study shows that in countries with lower book-tax conformity, the effect of law enforcement on the complementary level of financial and tax aggressiveness is stronger than in countries with higher book-tax conformity. These results suggest that country characteristics influence managers’ decisions to either present financial statements and tax reporting aggressively at the same time or not.

Original languageEnglish
Pages (from-to)45-62
Number of pages18
JournalAsian Academy of Management Journal of Accounting and Finance
Volume16
Issue number1
DOIs
Publication statusPublished - 2020

Keywords

  • Book-tax conformity
  • Complementary level of financial and tax aggressiveness
  • Law enforcement

Fingerprint Dive into the research topics of 'Do country characteristics affect the complementary level of financial and tax aggressiveness?'. Together they form a unique fingerprint.

Cite this