Legal and Financial Synergy: Tax Avoidance as a Moderator of Corporate Governance Mechanisms and Financial Performance

Abstract

Aims: This research will examine the ongoing recovery conditions in the economic sector after the COVID-19 pandemic for all countries, including Indonesia. This study aims to analyze financial performance after and before the COVID-19 pandemic with tax avoidance as a moderation variable in the relationship of governance mechanisms affecting financial performance.   Implications: Tax avoidance will be a moderation variable, while the governance mechanism will be represented by institutional ownership and an audit committee that affects financial performance which will be represented by a Return On Asset (ROA) variable. The sample of this study is 189 manufacturing companies listed on the Indonesia Stock Exchange from 2019 to 2021.   Method: This study uses panel data, one of the regression completion procedures with a high degree of flexibility in research that connects theories, concepts, and data that can be done in research. The variables used in this research data analysis method are Regression Ordinary Least Square, Fixed Effects, Random Effects, and Robust with Stata Software.   Results: The results showed that the first hypothesis showed that institutional ownership had a significant positive effect on ROA, for the second hypothesis showed that the audit committee had a significant negative effect on, while if moderated by tax avoidance, the results of the third hypothesis would weaken the influence of institutional ownership relations on ROA, while the fourth hypothesis would weaken the influence of the audit committee on tax avoidance.