Do Tax Aggressiveness And Dividend Policy Affect The Relationship Between Earnings Management And Cost Of Debt? Case In Energy Sector Indonesia

  • Kartika Sitorus Economic and Business Faculty, Esa Unggul University
  • Abdurrahman Abdurrahman Economic and Business Faculty, Esa Unggul University
  • Eka Bertuah Economic and Business Faculty, Esa Unggul University
  • Sapto Jumono Economic and Business Faculty, Esa Unggul University
Keywords: earnings management, tax aggressiveness, cost of debt


Our study investigates how earnings management affects the cost of debt in energy sector firms on the Indonesian Stock Exchange (IDX) period 2015 to 2021. It further involves mediating and moderating the effect of tax aggressiveness and dividend policy. The Structural Equation Modeling (SEM) approach was used to analyze 315 panel data. We found a negative effect of earnings management and audit quality on the cost of debt. Earnings management is found to have a positive effect on tax aggressiveness, while tax aggressiveness has a negative impact on the cost of debt. Tax aggressiveness mediates earnings management-cost of debt effect exhibiting a negative correlation. Lastly, dividend policy is able to strengthen the effect of earnings management on the cost of debt. This research is intended to provide managerial implications for the companies and creditors regarding the asymmetry of financial report information. Policy implications, particularly for fiscal regulators pertaining to tax aggressiveness and financial services authorities concerned with assessing the capability of prospective debtors.


Abdurrahman, A., Jumono, S., & Lubna, L. (2020). Prediction Model of Earning Management Actions, Intellectual Capital, and Efficiency Ratios on the Performance of Service Sector Companies in Indonesia. 24(01), 3088–3096.
Al-Najjar, B., & Kilincarslan, E. (2019). What do we know about the dividend puzzle? – A literature survey. International Journal of Managerial Finance, 15(2), 205–235.
Aladwan, M. (2019). Accrual based and real earning management association with dividends policy “the case of Jordan.” Italian Journal of Pure and Applied Mathematics, 41, 691–707.
Aleqab, M. M., & Ighnaim, M. M. (2021). The impact of board characteristics on earnings management. Journal of Governance and Regulation, 10(3).
Amidu, M., Coffie, W., & Acquah, P. (2019). Transfer pricing, earnings management and tax avoidance of firms in Ghana. Journal of Financial Crime, 26(1), 235–259.
Amiram, D., Bauer, A. M., & Frank, M. M. (2019). Tax avoidance at public corporations driven by shareholder taxes: Evidence from changes in dividend tax policy. Accounting Review, 94(5), 27–55.
Atkinson, A. A., Kaplan, R. S., Matsumura, E. M., & Young, S. M. . (2012). Management accounting: Information for decision making and strategy execution. In Pearson Education Limited: Vol. (6th ed., Issue). Pearson Education Limited.
Bacha, S. (2019). Corporate Governance Practices and Audit Quality : Do They Matter for the Cost of Debt ? 2262–2282.
Beltrame, F., Floreani, J., Sclip, A. (n.d.). Earnings Quality and the Cost of Debt of SMEs. In: Chesini, G., Giaretta, E., Paltrinieri, A. (eds) Financial Markets, SME Financing and Emerging Economies. Palgrave Macmillan Studies in Banking and Financial Institutions. Palgrave Macmillan, Cham. https:
Benjamin, S. J., & Biswas, P. (2018). Board gender composition , dividend policy and COD : the implications of CEO duality.
Blaylock, B., Doyle, E., & Elemes, A. (2022). Tax-Motivated Income Shifting in Audit-Firm Networks: Comparing Big 4 and non-Big 4 Firms.
Chasbiandani, T., & Herlan, H. (2019). Tax Avoidance Jangka Panjang di Indonesia. AFRE (Accounting and Financial Review), 2(1), 73–80.
Drake, K. D., Hamilton, R., & Lusch, S. J. (2020). Are declining effective tax rates indicative of tax avoidance? Insight from effective tax rate reconciliations. Journal of Accounting and Economics, 70(1).
Elizabeth, E., & Riswandari, E. (2022). TAX AGGRESSIVENESS IN INDONESIA AND MALAYSIA. BAKI (. Berkala Akuntansi Dan Keuangan Indonesia, 7 (1), 21–47.
Gandía, J. L., & Huguet, D. (2021). Combined Effects of Auditing and Discretionary Accruals on the Cost of Debt: Evidence From Spanish SMEs. In SAGE Open (Vol. 11, Issue 4).
Hair, J. F., Hult, G. T. M., Ringle, C. M., Sarstedt, M., Danks, N. P., & Ray, S. (2021). An Introduction to Structural Equation Modeling.
Hair Jr., J. F., Matthews, L. M., Matthews, R. L., & Sarstedt, M. (2017). PLS-SEM or CB-SEM: updated guidelines on which method to use. International Journal of Multivariate Data Analysis, 1(2), 107.
Hasan, S., Kassim, A. A. M., & Hamid, M. A. A. (2020). the Impact of Audit Quality, Audit Committee and Financial Reporting Quality: Evidence From Malaysia. International Journal of Economics and Financial Issues, 10(5), 272–281.
Hidayat, A. (2018). NoPenjelasan Metode Analisis Regresi Data Panel.
Hussain, A., & Akbar, M. (2022a). Borsa _ Istanbul Review Dividend policy and earnings management : Do agency problem and financing constraints matter ? Borsa Istanbul Review, 22(5), 839–853.
Hussain, A., & Akbar, M. (2022b). Dividend policy and earnings management: Do agency problem and financing constraints matter? Borsa Istanbul Review, 22(5), 839–853.
Iriyadi, I. (2019). Prevention of Earnings Management through Audit Committee and Audit Quality in the Award-Winning and Non-Winning Companies. Journal of Accounting Research, Organization and Economics, 2(2), 155–169.
Islami, L. H., Jumono, S., Munandar, A., & Abdurrahman, A. (2022). The Effect of Institutional Ownership and Managerial Ownership on Financial Performance Moderated by Dividend Policy. Quantitative Economics and Management Studies, 3(6), 852–859.
Jeradu, E. F. (2021). Pengaruh Ukuran Perusahaan, Kebijakan Dividen, Dan Perencanaan Pajak Terhadap Manajemen Laba. Akmenika: Jurnal Akuntansi Dan Manajemen, 18(1), 520–526.
Jony. (2020). Analisis faktor-faktor yang mempengaruhi Effective Tax Rate pada Perusahaan yang terdaftar di BEI. Journal of Accounting & Management Innovation, 4(2), 76–90.
Karjalainen, J., Kasanen, E., Kinnunen, J., & Niskanen, J. (2020). Dividends and tax avoidance as drivers of earnings management : Evidence from dividend-paying private SMEs in Finland. Journal of Small Business Management, 00(00), 1–33.
Kitagawa, N., & Shuto, A. (2019). Management Earnings Forecasts and the Cost of Debt.
Kovermann, J. H. (2018). Tax avoidance, tax risk, and the cost of debt in a bank-dominated economy. Managerial Auditing Journal, 33(8–9), 683–699.
Kurniawati, H., Cauwenberge, P. Van, & Bauwhede, H. Vander. (2019). Affiliation of Indonesian audit firms with Big4 and second-tier audit firms and the cost of debt. July 2017, 1–16.
Li, Y., Li, X., Xiang, E., & Geri Djajadikerta, H. (2020). Financial distress, internal control, and earnings management: Evidence from China. Journal of Contemporary Accounting and Economics, 16(3).
Mollik, A. T., Mir, M., McIver, R., & Bepari, M. K. (2020). Effects of audit quality and audit committee characteristics on earnings management during the global financial crisis – evidence from Australia. Australasian Accounting, Business and Finance Journal, 14(4), 85–115.
Mustika, R., Ananto, R. P., & Handayani, D. (2018). Analisis Tarif Pajak Efektif di Indonesia. Jurnal Akuntansi, Keuangan Dan Bisnis, 11(2), 1–8.
Nurlinda, R. A., & Bertuah, E. (2019). Financial performance information as forming corporate failure model in Indonesia. Academy of Accounting and Financial Studies Journal, 23(Special Issue 1), 2635.
Orazalin, N. (2018). Earnings management , audit quality , and cost of debt : evidence from a Central Asian economy. 2014.
Prasetya Margono, F., & Gantino, R. (2021). Influence of Firm Size, Leverage, Profitability, and Dividend Policy on Firm Value of Companies in Indonesia Stock Exchange. Copernican Journal of Finance & Accounting, 10(2), 45–61.
Qawqzeh, H. K., Endut, W. A., Rashid, N., Johari, R. J., Hamid, N. A., & Rasit, Z. A. (2018). Auditor Tenure, Audit Firm Rotation and Audit Quality: A Literature Review. International Journal of Academic Research in Business and Social Sciences, 8(12).
Rahman, N. G. A., Flayyih, H. H., & Salih, J. I. (2021). An Empirical Analysis on the Impact of External Auditing Quality on the Earnings Management of the Iraqi Industrial Companies under financial for the period 2010 to 2017. Studies of Applied Economics, 39(11).
Ruslim, H., & Muspyta, R. (2021). The Effect of Profitability and Financial Leverage on Cost of Debt Moderated Earnings Management. Jurnal Ekonomi, 26(1), 35.
Safiq, M., Yustina, A. I., & Muhaqiyah, A. (2018). Dampak Earnings Management dalam Hubungan Kinerja dengan Cost of Debt (Studi Pada Perusahaan Manufaktur di Bursa Efek Indonesia). JAAF (Journal of Applied Accounting and Finance), 2(1), 64.
Santosa, C., & Rasyid, S. (2022). Pengaruh Asimetri Informasi, Financial Distress, Dan Komite Audit Terhadap Manajemen Laba. Akrual : Jurnal Bisnis Dan Akuntansi Kontemporer, 15(1), 12–22.
Scott, R. W., & O’Brien, P. (2019). Financial Accounting Theory. In Pearson Prentice Hall: Toronto (8th ed.). Pearson Education.
Sulistyanto, S. (2017). Manajemen Laba (Teori & Model Empiris). Grasindo.
Thi, H., Le, T., Vinh, X., & Thuc, T. (2021). International Review of Financial Analysis Accruals quality and the cost of debt : Evidence from Vietnam. International Review of Financial Analysis, 76(March), 101726.
Thu, P. A., Khanh, T. H. T., Ha, N. T. T., & Khuong, N. V. (2018). Perceived audit quality, earnings management and cost of debt capital: Evidence from the energy listed firms on Vietnam’s stock market. International Journal of Energy Economics and Policy, 8(6), 120–127.
Tjondro, E., Halim, M. M., & Iskandar, A. W. (2020). Earning Management, Income Volatility, and Cost of Debt. 158(Teams), 384–391.
Trong, N. N. (2020). Firm performance : the moderation impact of debt and dividend policies on overinvestment.
Ullah, K., & Bagh, T. (2019). Finance and Management Scholar at Riphah International University Islamabad, Pakistan, Faculty of Management Sciences. 10(4), 49–58.
How to Cite
Sitorus, K., Abdurrahman, A., Bertuah, E., & Jumono, S. (2023). Do Tax Aggressiveness And Dividend Policy Affect The Relationship Between Earnings Management And Cost Of Debt? Case In Energy Sector Indonesia. Asian Journal of Management, Entrepreneurship and Social Science, 3(04), 1165-1195. Retrieved from