THE EFFECT OF EXECUTIVE CHARACTERISTICS, CEO OVERCONFIDENCE, CAPITAL INTENSITY ON TAX AVOIDANCE

Abstract

This study examines the effect of executive characteristics, CEO overconfidence, capital intensity on tax avoidance. The independent variables of this study are executive characteristics, CEO overconfidence, capital intensity; the dependent variable is tax avoidance. Earnings measure executive characteristics before interest expense, taxes, depreciation, amortization divided by a total asset. CEO overconfidence is measured by combining these proxies: overinvestment (also known as an excess investment), the ratio of liabilities to equity, and dividend yield. If two of the three combinations of proxies are met, then the related company is given a value of one (1) and a value of zero (0) otherwise. The capital intensity is measured by a total fixed asset divided by a total asset. Tax avoidance is measured by cash effective tax rates (CETR). The population in this study is 310 primary consumption sector companies listed on the Indonesian Stock Exchange from 2016 to 2020. The sample was selected by purposive sampling method and finally obtained 175 primary consumption sector companies that fulfill the criteria. Data were analyzed using multiple regression analysis models. The result shows that executive characteristics and capital intensity positively influence tax avoidance. CEO overconfidence is negatively influencing tax avoidance.

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