Governance Roles in Financial Flexibility and Tax Avoidance

Gracia Natali Adonia Nata (Accounting Department, Faculty of Economics and Business, State University of Malang)
Tomy Rizky Izzalqurny (Accounting Department, Faculty of Economics and Business, State University of Malang)

Jurnal Akuntansi
Vol. 30 No. 2 (2026): May-August 2026

Indonesia's tax-to-GDP ratio has stagnated below regional and international benchmarks, and corporate tax avoidance (TA) accounts for most of the resulting revenue loss. This study examines how the investment opportunity set (IOS) and free cash flow (FCF) relate to TA, and whether audit committee size (ACS) and Big Four Affiliation (BIG4A) moderate those relationships. Panelfixed-effects regression is applied to 201 firm-year observations from 67 manufacturing firms listed on the Indonesia Stock Exchange during 2022–2024. TA is proxied inversely by the GAAP effective tax rate (ETR). Both IOS and FCF show negative and significant coefficients on ETR, indicating that firms with greater growth opportunities and larger surplus liquidity engage in more intensive TA.ACS moderates the FCF–TA relationship in the direction opposite to that predicted, whereas the IOS–ACS, IOS–BIG4A, and FCF–BIG4A interactions are statistically insignificant. Boards of commissioners should weigh substantive monitoring attributesrather than committee size and auditor affiliation alone.