Purpose This research aimed to determine the effect of the effective tax rate in public company investment in Indonesia. Design/methodology/approach The research was conducted using firm data during ...2008-2020 and considered the long-term investment concept. Meanwhile, the cross-section of 672 companies and the ordinary least square technique were used to get the estimation. Findings The estimation result showed that the effective tax rate has significant negative effect on fixed asset investment. If effective tax rate decrease, it can be because the company gets tax rate reduction incentives, conduct accelerated depreciation, fiscal reconciliation on the financial statement which can increase fixed asset investments. Moreover, the estimation also showed that the age of the company is able to strengthen the relationship between effective tax rate and company investment. The difference in domestic and foreign companies does not affect the elasticity ETR toward investment. Research limitations/implications Based on the estimation result mentioned, it is expected to provide guidance in implementing incentive tax, which can encourage public company investment. Originality/value There are many studies on the effect of income tax rates, but the results cannot be used specifically in Indonesia since the tax sensitivity may be different based on the development level of the country and the characteristics of the company.
We examine contagion in earnings management using 2,376 restatements announced during the years 1997–2008. Controlling for industry and firm characteristics, firms are more likely to begin managing ...earnings after the public announcement of a restatement by another firm in their industry or neighborhood. Such contagion is absent when the restating firm is disciplined by the SEC or class action lawsuits, suggesting deterrent effects of enforcement activity. Contagion among peers is observed (1) in the same account as the one restated by the target firm, or (2) when larger target firms restate or the restatement is prominently disclosed, or (3) when the target firm's restatement is less severe. Contagion stops during the years 2003–2005, possibly due to the enforcement associated with the Sarbanes-Oxley Act (SOX), but reappears during 2006–2008, perhaps because the sting associated with SOX has worn off. In sum, peers' actions appear to affect a firm's earnings management decisions.
Standard-setters believe high-quality internal audit functions (IAFs) serve as a key resource to audit committees for monitoring senior management. However, regulators do not enforce IAF quality or ...require disclosures relating to IAF quality, which is in stark contrast to regulatory requirements placed on boards, audit committees, and external auditors. Using proprietary data, I find that a composite measure of IAF quality is negatively associated with the likelihood of management misconduct even after controlling for board, audit committee, and external auditor quality. This result is robust to a variety of other specifications, including controlling for internal control quality and separate estimation during the pre- and post-SOX time periods. A difference-in-differences analysis indicates that misconduct firms have low IAF quality and competence during misconduct years and improve IAF quality and competence in the post-misconduct years. These findings suggest that regulators, audit committees, and other stakeholders should consider ways to improve IAF quality.
Scholars have become increasingly interested in the importance of corporate social advocacy to an organization’s bottom line. However, few researchers have investigated the subliminal mechanism with ...which corporations’ political engagement attracts public attention and creates positive corporate-public relationships. This study examines corporations’ identification with sociopolitical issues as an identity signaling practice. Rooted in the signaling and social identity theories, this study proposes a model that demonstrates the positive effects of corporate social advocacy activities on brand loyalty. This study sheds light on the role of brand community engagement as a signal verification process. Public-company identification leads to brand loyalty, which indicates the public’s acceptance of a corporation’s signal. We tested our proposed model through an online survey with participants recruited from Amazon Mechanical Turk (N = 960). Theoretical and practical contributions of this study were discussed.
Currently, various countries, including Indonesia, are being hit by an outbreak of a virus pandemic known as Covid-19. Everyone keeps their distance to break the chain of transmission; even various ...companies implement policies to implement a work from home (WFH) system to reduce the possibility of spreading the virus. The problem is that a Public Company must hold a GMS within six months after closing the company’s financial year. In connection with the increasingly rampant covid-19 virus pandemic and the policy from the President of the Republic of Indonesia dated July 1, 2021, regarding emergency PPKM from July 3, 2021, to July 20, 2021, in the Java and Bali regions, the implementation of the RUPS of Public Company is very forced to go through virtual. This study aims to obtain answers to the following problems: (1) How is the process of the RUPS of a Public Company held virtually to remain valid during PPKM; (2) How is the mechanism for implementing the RUPS? Of a Public Company using the Electronic RUPS facility. Solving this problem is pursued by empirical normative legal research methods using secondary data. The results of this study are: (1) The RUPS process for Public companies is accommodated in the provisions of POJK Number 15/POJK.04/2020 and POJK Number 16/POJK.04/2020. The e-RUPS will still be declared valid if it does not conflict with the Company Regulations and POJK; (2) The mechanism for implementing the e-GMS using the E-RUPSS facility through eASY.KSEI has been carried out in 4 (four) stages: Announcement of the RUPSS, Invitation to the RUPS, Implementation of the RUPSS, and Reporting of the RUPSS.
We provide more direct evidence on the causal relation between the quality of financial reporting and investment efficiency. We examine the investment behavior of a sample of firms that disclosed ...internal control weaknesses under the Sarbanes-Oxley Act. We find that prior to the disclosure, these firms under-invest (over-invest) when they are financially constrained (unconstrained). More importantly, we find that after the disclosure, these firms’ investment efficiency improves significantly.
•Material weaknesses in ICFR are associated with investment inefficiency.•After the disclosure of ICFR weaknesses, the investment inefficiency gets mitigated.•These effects are robust to controls for earnings quality and various corporate governance mechanisms.
► We find that both board size and independent directors decrease bank performance. ► Gender diversity in the boardroom improves bank performance with caveats. ► Boards are relevant for banks with ...low market power, staggered boards and for small banks.
We study whether board structure (board size, independence and gender diversity) in banks relates to performance. Using a broad panel of large US bank holding companies over the period 1997–2011, we find that both board size and independent directors decrease bank performance. Although gender diversity improves bank performance in the pre-Sarbanes-Oxley Act (SOX) period (1997–2002), the positive effect of gender diminishes in both the post-SOX (2003–2006) and the crisis periods (2007–2011). Finally, we show that board structure is particularly relevant for banks with low market power, if they are immune to the threat of external takeover and/or they are small. Our two-step system generalised method of moments estimation accounts for endogeneity concerns (simultaneity, reverse causality and unobserved heterogeneity). The findings are robust to a wide range of other sensitivity checks including alternative proxies for bank performance.
We document that accrual-based earnings management increased steadily from 1987 until the passage of the Sarbanes-Oxley Act (SOX) in 2002, followed by a significant decline after the passage of SOX. ...Conversely, the level of real earnings management activities declined prior to SOX and increased significantly after the passage of SOX, suggesting that firms switched from accrual-based to real earnings management methods after the passage of SOX. We also document that the accrual-based earnings management activities were particularly high in the period immediately preceding SOX. Consistent with these results, we find that firms that just achieved important earnings benchmarks used less accruals and more real earnings management after SOX when compared to similar firms before SOX. In addition, our analysis provides evidence that the increases in accrual-based earnings management in the period preceding SOX were concurrent with increases in equity-based compensation. Our results suggest that stock-option components provide a differential set of incentives with regard to accrual-based earnings management. We document that while new options granted during the current period are negatively associated with income-increasing accrual-based earnings management, unexercised options are positively associated with income-increasing accrual-based earnings management.
Using a large sample of U.S. firms spanning the period 2000–2010, we document a strong positive association between the sensitivity of CEO compensation portfolio to stock return volatility (vega) and ...audit fees. We also show that the positive association between vega and audit fees is weaker in the post-Sarbanes-Oxley Act (SOX) period. In supplementary tests, we show that the relation between vega and audit fees is stronger for firms with older CEOs and in firms where the CEO is also chairman of the board. Collectively, our results suggest that audit firms incorporate executive risk-taking incentives in the fees they charge for their services.
To ensure that audit committees provide sufficient oversight over the auditing process and quality of financial reporting, legislators have imposed stricter requirements on the independence of audit ...committe members. Although many audit committees appear to be "fully" independent, anecdotal evidence suggests that CEOs often appoint directors from their social networks. Based on a 2004 to 2008 sample of U.S.-listed companies after the Sarbanes-Oxley Act, we find that these social ties have a negative effect on variables that proxy for oversight quality. In particular, we find that firms whose audit committees have "friendship" ties to the CEO purchase fewer audit services and engage more in earnings management. Auditors are also less likely to issue going-concern opinions or to report internal control weaknesses when friendship ties are present. On the other hand, social ties formed through "advice networks" do not seem to hamper the quality of audit committee oversight.
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