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JoSS:

Journal of Social Science

EFFECT OF TAX PLANNING, AUDIT QUALITY, AND CAPITAL INTENSITY ON

COMPANY VALUE WITH INDEPENDENT COMMISSIONERS AS MODERATION

VARIABLES

Aziz Ambara

, Melinda Malau

Universitas Trisakti

, Universitas Kristen Indonesia

[email protected]

, melinda.malau@uki.ac.id

KEYWORDS

Tax planning, audit

quality, capital

intensity,

independent

commissioners.

ARTICLE INFO

Accepted:

13 January 2023

Revised:

15 January 2023

Approved:

19 January 2023

ABSTRACT

This study aims to test tax planning, audit quality, and capital

intensity against company value moderated by independent

commissioners. Purposive sampling method used as a method in

collecting research data and the multiple regression equation model

used as statistical analysis tool. The sample in this study are 29 issuers

on the Indonesia Stock Exchange, especially manufacturing sector

companies whose financial statements have been published for 5

(five) years from 2017 to 2021. Based on the results of this study, it

shows that audit quality has a significant effect on company value, tax

planning has an insignificant effect on company value, capital intensity

does not affect company value, independent commissioners strengthen the

influence between tax planning and audit quality on company value,

while independent commissioners do not strengthen the influence

between capital intensity to the value of the company. This study can

be information for shareholders, management, and interested parties

in understanding and using the services of a big four public accountant

that will affect audit results and can increase company value..

INTRODUCTION

One of the main goals of the company is to increase the wealth of shareholders.

Measurement in the assessment of shareholders' wealth can be done by looking at the

company’s value. The high value of the company reflects the good condition of the company.

This will have a lot of impact on several things including the assessment of outsiders in business

development and for internal parties, namely the assessment of good management

performance.

Ningrum (2021) company value information can be seen from the financial statements

published by the company, as a reflection of the company's financial performance. Financial

statements are the end of a process in accounting to provide a complete and reasonable picture

of the actual conditions that occur in the company. Along the way, the conditions described in

the company's financial statements may provide biased information that does not correspond

to the reality that actually occurred. One of the reasons is the existence of several interests in

each individual with the aim that his performance looks good in the eyes of shareholders. This

is in accordance with the theory of agencies, in this theory where the principal and the manager

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of the company that is considered an agent have two different interests. The value of the

company can be influenced by tax planning.

Vu et al. (2022) expectations of companies wanting a broad scope in reducing tax liability

through tax planning. Various steps were taken to take advantage of the loopholes in achieving

such actions. Agency and traditional theory are two perspectives to explain the relationship

between tax planning and corporate value. Agency theory argues that tax planning harms the

company value because managers may reduce accounting or tax liability income

Vu & Le (2021) the consequences of tax planning can bring benefits or create costs for

the company. Tax planning is effective when the benefits outweigh the costs. As a result, the

company value increases.

Wijaya (2020) The Indonesian capital market provide positive appreciation to companies

that have been audited with higher quality. High quality of audit is expected to reduce agency

costs, reduce information asymmetry, and increase company value. Companies are encouraged

to use high quality auditors in order to increase company value in the Indonesian capital market.

Alsmairat et al. (2018) companies that have high quality of audit can be able to minimize

audit failures and earning management. If this can be addressed then it could potentially help

reduce agency costs and prevent value reduction diversification motivated by agency conflicts.

(Isaac et al. 2021) knowledge is the main source of competitive advantage and can

increase economic growth and company value. In the field of auditing, the authority is aware

of the need for improved reporting and has thus issued a new standard regarding auditor reports.

While new reports are expected to improve audit reporting and improve audit quality, the move

could also increase audit costs as auditors need to expand their efforts in conducting audits.

High company value reflects the good condition of the company, this condition can

increase investor confidence in the inclusion of capital for the company going concern. Capital

is one of the main factors in increasing the company value. In increasing the company value,

company not only needs policies controlled by the owner and the implementation of planning

from management but must also be supported by adequate capital forces. Capital intensity may

affect the company value. High capital intensity can cause depreciation expenses as well as

high, this can affect the company's earning which causes the company's value to rise or fall.

Alamsah & Adi (2022) capital intensity affects the company value. Capital intensity is

measured using the comparison of fixed assets with total assets, this gives an idea that the

effectiveness of the company in using assets can increase company value. This can happen

because almost all fixed assets are depreciated and depreciation costs are costs that can reduce

income in the calculation of corporate taxes. Thus, the greater the depreciation fee, the smaller

the tax rate that must be paid by the company which has implications for increasing revenue.

Based on POJK number 57/POJK.04/2017, board of commissioners can hold concurrent

positions a) at most two people for other issuers as members of the board of directors or

commissioners, b) at most four people for other issuers as members of the board of

commissioners, if: the board of commissioners does not concurrently serve as a member of the

board, c) a maximum of five people; The board member concerned with the board member or

other board member, as long as it does not meet the provisions of other regulations. If there are

differences with other regulations.

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Intensity On Company Value With Independent

Commissioners As Moderation Variables

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The purpose of this study is to asses the effect of tax planning, audit quality, and capital

intensity on company value. As well as testing whether independent commissioners can

moderate tax planning, audit quality, and capital intensity to the companies value in

manufacturing companies listed on Indonesia Stock Exchange (IDX) during the research

period.

This research examines companies listed on Indonesia Stock Exchange with a five-year

period (2017-2021). The object of his research is the enterprises of the subsector of the

consumer goods industry. Research conducted on companies in the consumer goods industry

subsector which is one of the subsectors that have a significant contribution to economic

growth. In addition, the industry in this sector supports people's daily activities. Based on the

above background, the title of this study is "The effect of tax planning, audit quality, and capital

intensity, on company value, with independent commissioners as moderation variables".

METHOD RESEARCH

This research is a type of quantitative research. The population is a subsector of the

consumer goods industry listed on the Indonesia Stock Exchange for the 2017-2021 period.

The number of samples was 45 taken using purposive sampling techniques with criteria as

follows:

1. The Company publishes audited financial statements using rupiah currency for the period

31 December 2017 – 31 December 2021.

2. The company did not experience delisting from the stock exchange during the period 31

December 2017 – 31 December 2021.

3. The company experiences earning before income tax.

A. Company Value

Alamsah & Adi (2022), (VU and LE 2021), (Jihadi et al. 2021), and Abba & Sadah

(2020), Tobins Q was first introduced by Nicholas Kaldor in 1966 which was later in 1968

reintroduced by James Tobin, an American economist who hypothesized that corporate

replacement costs should be equal to the combined market value of companies in the stock

market. Through Tobin's Q, if a ratio of 1 (one) is obtained, the company is valued equally

between the value of the listed company and the company value in the market. If it is below

1 (one), the company is under valued or in the market the company value is below the

recorded value. On the other hand, if it is above 1 (one) then the company is overvalued or

valued higher in the market than the company value. Using market data, of course,

management cannot carry out manipulations, other than trying to increase the value of the

company.

EMV + Total Debt

TQ = ........…………………………………(1)

Total Assets

Information :

TQ : Company Values

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EMV : Equity Market Value

EMV obtained from the result of multiplying the closing price at year end (closing price) by

the number of shares outstanding at the year end.

B. Tax Planning

Tax planning in is proxied with the effective tax rate which is a comparison of tax

expense minus deffered tax expense divided by taxable earning (Vu & Le, 2021; Siahaan et

al., 2022).

Tax Expense - Deffered Tax Expense

Effective Tax Rate (ETR)= ………(2)

Earning Before Tax

C. Audit Quality

Measurement of audit quality based on research that has been studied by Aca et al.

(2020); Abba & Sadah (2020); (Julius, Malau, and Simanjuntak 2020); (Monametsi and

Agasha 2020), the measure of auditor quality is measured using dummy variables, namely

for the Company's financial statements audited by public accountant in the Big 4

classification (big-four) during the research period given a value of 1 (one) while outside

the classification is given a value of 0 (zero).

Quality of audit = Big Four ………………………………………………….(3)

D. Capital Intensity

Apriyanti & Arifin (2021); Kalbuana et al. (2020) companies with large fixed assets

will charge large depreciations so as to generate small earnings. Small earnings result in a

small corporate tax burden. Thus, the size of fixed assets owned by the company can

increase the potential to carry out acts of tax aggressiveness. The capital intensity ratio (CIR)

proxy is formulated as follows:

Total Fixed Assets

Capital Intensity Ratio (CIR) = ……………………..(4)

Total Assets

E. Independent Commissioner

Apriyanti & Arifin (2021); and Sutiyono, (2022), independent commissioners are part

of the board of commissioners elected through the General Meeting of Shareholders from

parties who do not have a relationship with the board of directors member, members of the

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Intensity On Company Value With Independent

Commissioners As Moderation Variables

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board of commissioners and general shareholders. Independent commissioners are proxied

as follows:

Number of Independent Commissioner members

Independent Commissioner = ...(5)

Number of the Board of Commissioners members

F. Leverage

The control variable in this study is leverage. Lamba & Atahau (2022) a company that

uses a larger source of debt funds than its own capital can get greater earnings for investors

than a company that uses a smaller source of debt funds. This is because the company will

first prioritize obligations for the expenses it has before distributing to investors. The source

of funds from debt can be used in rotating the company's activities in order to obtain earnings

that can increase the the company value.

Measurement of leverage in the study is based on previous research conducted by

(Sari and Afriansyah 2022); Nadhiyah & Fitria (2021); (Julius, Malau, and Simanjuntak

2020) where leverage in this study is proxied with a debt to equity ratio. Debt to equity ratio

is a ratio used to find out how much part of each amount of capital is used as collateral for

debt. Leverage is calculated by the formula:

Total (debt)

Debt to Equity Ratio = X 100% ………….(6)

(equity)

There are several ways that can be used to analyze data in a study. The analysis in this

study used descriptive statistics and hypothesis testing. The analysis technique used for

hypothesis testing is multiple regression analysis

G. Descriptive Statistical Testing

(Ghozali 2016) descriptive statistics provide an overview or description of a data seen

from the average value (mean), standard deviation, variance, maximum, minimum, sum,

range, kurtosis, and skewness (distribution scoring). The descriptive statistics used in this

study are the mean, maximum, minimum, standard deviation, and variance values of each

of the variables studied.

H. Regression Equation

The regression equation of company value in this study can be measured as follows:

FV = α - β1.TP + β2.KA + β3.CI – β4.KOMIND*TP + β5.KOMIND*KA +

β6.KOMIND*CI + ε …………(7)

Information:

FV = Firm Value

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TP = Tax Planning

KA = Audit Quality

CI = Capital Intensity

KOMIND = Independent Commissioner

ε = Error

RESULT AND DISCUSSION

Table 1

FV = α - β1.TP + β2.KA + β3.CI – β4.KOMIND*TP + β5.KOMIND*KA +

β6.KOMIND*CI + ε

Variable

Prediction

Coefficient

1-Tailed

Glejser

Test

Statistics

Collinearity

Tolerance

VIF

Constanta

2,696

0,0040

0,001

ETR

-1,750

0,0415

0,698

0,136

7,339

-2,882

0,0025

0,176

0,202

4,946

-0,791

0,2151

0,295

0,369

2,708

KOMIND*ETR

2,252

0,0130

0,891

0,140

7,140

KOMIND*KA

1,791

0,0353

0,475

0,197

5,086

KOMIND*CI

1,424

0,7530

0,451

0,154

6,498

Normality Test

0,200

Durbin-Watson Stat

0,887

Adjusted R2

0,092

Prob (F-Statistics)

0,014

Total Observation

115

*Significant at the level of 5%

I. Normality Test

The results from table 1 above show that significant data of 0.200 which is above 0.05.

Therefore, the residual value is distributed normally so that the research model is stated to

have met the assumption of normality.

a. Heterochedasticity Test

In this case using the glejser test where the absolute regressing of the error with an

independent variable, it is expected that there are no significant variables. The result of

this test is that the probability value is greater than the significant level (0.05) then it does

not reject H0. It can be concluded that risidual models have met the assumption of

homogeneity / non heterokedasticity.

b. Multicholinearity Test

Table 1 shows that the variables Tax Planning, Audit Quality, Capital Intensity,

Independent Commissioner, Independent Commissioner*Tax Planning, Independent

Commissioner*Audit Quality, Independent Commissioner*Capital Intensity have a VIF

of < 10. Then H0 is accepted, meaning that the variables indicate no symptoms of

colinearity. In other words, the relationship between variables does not have a very strong

correlation with other variables. In other words, it can be concluded that the regression

model used avoids the problem of multicholinearity.

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Commissioners As Moderation Variables

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c. Autocorrelation Test

Durbin-Watson (D-W) autocorrelation test results, from the table above, the D-W

value is 0.887 (D-W number between -2 to +2) which means that there is no regression

model autocorrelation in this study.

J. R & R-Square Test (Coefficient of Determination)

Table 1 shows the adjusted r square values of 0.092 > 0 and close to 1, so the

independent variables provide almost all the information needed to predict the variation of

the dependent variable. While the R value is 0.385

a. F Test

Table 1 shows that the independent variables tested had a significant effect on the

earning quality variables. This can be seen from the calculated F value whose value is

2.659 with a probability level of 0.014 (significance), because the probability is much

smaller than 0.05, the regression model can be used to predict the company value.

b. Tax planning negatively affects the company value

The results of the regression analysis showed that the significance value was 0.0415

and had a beta value of -1.750. When compared to the alpha value of 5%, this significant

value is much smaller (0.0415 < 0.05). The results of this study are in accordance with

research conducted (Le, Vu, and Nguyen 2022), tax planning negatively affects the

company value. The more often the company minimizes the tax burden, the more the

company value will increase. Companies view taxes as a burden that can reduce revenue,

so companies try to be able to pay as little tax as possible by doing tax planning.

c. Audit quality positively affects the company value

The results of the regression analysis showed that the significance value was 0.0025

and had a beta value of -2.882. When compared to the alpha value of 5%, this significant

value is smaller (0.0025 < 0.05). The quality of the audit has an insignificant effect on

the company value. The results of this study are in line with research conducted by (Aca,

Musa, and Garba 2020) audit quality has a negative influence on company value.

Companies that have low audit quality can increase audit failures and will affect the

company value.

K. Capital intensity positively affects the company value

The results of the regression analysis showed that the significance value was 0.2151

and had a beta value of -0.791. When compared to the alpha value of 5%, this significant

value is greater (0.2151 > 0.05). Capital intensity has no effect on the company value. The

results of this study are in line with the research conducted by (Putra and Dondoan 2021).

Capital intensity does not have a significant influence on the company value. This is

because it is possible that the low growth of capital or assets in the company can reduce the

company value so that investors no longer want to invest in the company.

L. Independent commissioner strengthens the effect of tax planning on company value

The Result of the Regression analysis showed that the significance value was 0.0130

and had a beta value of 2.252. When compared to an alpha value of 5%, this significant

value is smaller (0.0130 < 0.05). Independent commissioners reinforce the influence of tax

planning and corporate value. The existence of independent commissioners strengthens

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supervision of management in carrying out tax planning actions that can affect the company

value.

M. Independent commissioners strengthen the effect of audit quality on company value

The result of the Regression analysis showed that the significance value was 0.0353

and had a beta value of 1.791. When compared to the alpha value of 5%, this significant

value is smaller (0.0353 < 0.05). Independent commissioners strengthen the effect of audit

quality on company value. The existence of independent commissioners makes companies

that are being audited by qualified auditors further increase the company value.

N. Independent commissioners strengthen the effect of capital intensity on company value

The results of the regression analysis showed that the significance value was 0.7530

and had a beta value of 1.424. When compared to the alpha value of 5%, this significant

value is greater (0.7530 > 0.05). Independent commissioners do not reinforce the effect of

capital intensity on company value. This is because investors can see and analyze directly

the assets of the company through the company's audited financial statements.

CONCLUSION

Based on the results of the analysis and discussion that have been described, several

conclusions can be drawn as follows: Tax planning negatively affects the company value The

company views taxes as a burden that can reduce revenue, so the company tries to be able to

pay the smallest possible tax by doing tax planning. Audit quality has an insignificant effect

on the company value Companies that have low audit quality can increase audit failures and

will affect the company value. Capital intensity does not have a positive effect on the

company value The existence of low capital or asset growth in the company can reduce the

company value so that investors no longer want to invest in companies. Independent

commissioners strengthen the effect of tax planning on company value The existence of

independent commissioners strengthens supervision of management in carrying out tax

planning actions that can affect company value. Independent commissioners strengthen the

influence of audit quality on company value The existence of independent commissioners

makes companies that are being audited by qualified auditors further increase company

value. Independent commissioners do not strengthen the effect of capital intensity on the

company value Investors look at and analyze directly the assets of the company through the

company's audited financial statements.

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Aziz Ambara, Melinda Malau (2023)

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