The Effects of Firm Size, Leverage, and Transfer Pricing on Tax Avoidance (An Empirical Study: Companies in the Industrial Sector Listed on the Indonesia Stock Exchange, 2021–2025)
DOI:
https://doi.org/10.65310/d2xhz050Keywords:
cash effective tax rate, firm size, leverage, tax avoidance, transfer pricingAbstract
This study examined the individual and simultaneous associations of firm size, leverage, and transfer pricing with tax avoidance among industrials sector companies listed on the Indonesia Stock Exchange during 2021–2025. A quantitative explanatory design was employed using purposive sampling, yielding 21 companies and 105 firm-year observations. Tax avoidance was measured using the cash effective tax rate (CETR), with lower values indicating greater tax avoidance. Panel regression analysis was conducted using STATA 15. Specification tests supported a random effects model, while firm-clustered robust standard errors addressed heteroskedasticity and serial correlation. Firm size (β = −0.0058; p = 0.588) and transfer pricing (β = 0.0187; p = 0.580) showed statistically insignificant associations with CETR. Leverage exhibited a positive and significant association (β = 0.0129; p = 0.013), suggesting lower tax avoidance, contrary to the expected tax-shield effect. However, this association became insignificant after excluding an extreme-leverage company (p = 0.137) or winsorizing leverage (p = 0.132). The variables were jointly significant only at the 10% level (Wald χ²(3) = 7.05; p = 0.0704), with an overall R² of 10.85%. The findings demonstrate limited explanatory power and sensitivity to extreme observations, emphasizing cautious interpretation of corporate tax avoidance determinants.
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