THE EFFECT OF CORPORATE

TAX AVOIDANCE
ON THE LEVEL CORPORATE
CASH HOLDINGS
EVIDENCE FROM
INDONESIAN PUBLIC LISTED COMPANIES

Written by Muhammad Irham Kurniawan and

Siti Nuryanah
Publish on 2017
INTRODUCTION 01
AMBITION

Reduce Cost

Tax avoidance

Opportunity

Cash holding
 LITERATUR REVIEW AND
HYPOTESIS DEVELOPMENT

TAX AVOIDANCE
B A AGENCY THEORY

C D
AGENCY THEORY AND TAX AVOIDANCE
TAX AVOIDANCE AND CASH HOLDING
 AGENCY THEORY TAX AVOIDANCE
“Agency relationship as a contract under which one or more person
“Tax avoidance is a tax payer’s effort to reduce tax payable,
(the principals) engage another person (the agent) to perform some
even through this attempt may not be in violation of the law, but
service on their behalf which involves delegating some decision
in fact it’s contrary to the purpose of tax legislation”
making authority to the agent”

A B
 D Tax avoidance is an Because of the asymmetric information
C
opportunistic baheviour for between the agent dan principals,

the managers,

tax avoid activities can be used as a tool to facilitate the

then manager attemps to limit some specific information
opportunistic behavior of managers which at the end
 asymmetric information  then causes company’s
increasing the cost of company
asset (cash) transferred to the agent

TAX AVOIDANCE AGENCY THEORY

AND CASH HOLDING AND TAX AVOIDANCE
HYPOTESIS
Tax avoidance affects
negatively to company’s
cash holding
03 RESEARCH METHODOLOGY

OVERVIEW
DATA ANALYSIS
Triggered by Dhaliwal et
This study adopts the
al. (2011) which found
RESEARCH METHOD model of Dhalowal et
that tax avoidance is
Quantitative study al. (2011) which was
able to facilitate
using secondary data originally developed
managers
Sample : (all public by Opler et al. (1999)
in transferring resources
i.e. company’s cash, companies in Indonesia
listed on the Indonesia
stock exchange except
property, real estate, etc
RESULT
 OUTLIER TEST
Based on this test, it can be seen that all data
variables have a value of p-value <0,05 means data
is not normally distributed

DESCRIPTIVE ANALYSIS

SELECTION OF PANEL DATA MODEL

this research is based on panel data where the
determination of the model is done through three
stages
CLASSICAL ASSUMPTION TEST RESULTS
This study uses a linear regression which must
qualify Best Linear Unbiased Estmates
SOME TOOLS
SIMULTANEOUS EFFECT TEST (F-TEST) AND (CHI^2
THAT USED TEST)
To know the independent variables level influence
variable dependent
ANALYSIS OF HYPOTHESIS TESTING RESULTS
To relationship between tax avoidance and cash
holdings policy is insignificant
05 DISCUSSION
Based on the results above, it is concluded that the
findings of the study are similar to Melinda (2013) that in
the context of Indonesia there is no evidence that tax
avoidance activities influence cash holdings of a
company.
The corporate policy of cash holdings can be explained
only by control variables of net working capital, leverage
and operating cash flows.
The other controlling variables namely capital
expenditure, growth, size and dividend policy of a
company are neither able to explain the amount of cash
held by the company.
 CONCLUSION

Based on eight-year research horizon with 368

observations collected from Indonesian public
companies, nevertheless, this study is unable to find
this relationship. The findings of this study still cannot
find evidence that tax avoidance has a significant
effect on the level of firm cash holdings in Indonesian
public companies, as found by previous studies in
Indonesia.