Title: THE EFFECT OF INNOVATION ON COMPANY VALUE THROUGH TAX AVOIDANCE

Authors: ANJELINA

Affiliations : Masters Program in Accounting, Faculty of Economics and Business, Universitas Airlangga , Surabaya, Indonesia

Publisher: Universitas Airlangga

Abstract

This study aims to examine the effect of innovation on tax avoidance and firm value, as well as to examine the effect of tax avoidance on firm value. This study uses a sample of manufacturing companies listed on the Indonesia Stock Exchange (IDX) in 2007-2017, a total sample of 133 companies with 1025 observations. The analysis technique used is panel data regression analysis with the STATA 13 program. Innovation is measured using two proxies, namely the number of patents and R&D intensity on sales, while tax avoidance is measured by three proxies, namely GAAP ETR (Effective Tax Rate), CETR (Cash Effective Tax Rate), and BTD (Book Tax Difference); and firm value is measured by TobinsQ. The results of this study are (1) innovation has a significant negative effect on tax avoidance, (2) tax avoidance has a significant positive effect on firm value, (3) innovation has a significant positive effect on firm value, and (4) tax avoidance is not a mediating variable in the relationship between innovation and firm value. This study proves that companies with numerous patents do not engage in tax avoidance, as evidenced by the small difference between accounting and taxable profits for these innovative companies. This also indicates that innovative companies do not divert their profits through tax avoidance to continue innovating. Furthermore, this study found that higher innovation rates increase the company's value. These results support the signaling theory, which states that innovation is a positive signal for companies because it reflects a company's competitiveness, thereby increasing its value.

Keywords: Innovation, R&D expenses scaled sales, patent, tax avoidance, firm value

Sources:  http://repository.unair.ac.id/80359/