Industry Matters: The Impact of Business Nature on Tax Avoidance and Financial Fraud Dynamics
Keywords:
Tax Avoidance; Financial Statement Fraud; Nature of Industry; Agency Theory; Fraud Triangle; PLS-SEM; Indonesia Stock Exchange
Abstract
This study investigates the effect of tax avoidance (TA) on financial statement fraud (FD) and examines the moderating role of the nature of industry (NI) among publicly listed companies in Indonesia from 2021 to 2024. Using a sample of 150 firm-year observations from manufacturing and service sectors, the analysis employs Partial Least Squares Structural Equation Modeling (PLS-SEM) to evaluate both direct and moderated relationships. The results reveal that TA has a positive and significant influence on FD, suggesting that aggressive tax strategies increase the likelihood of fraudulent financial reporting. Furthermore, NI significantly moderates this relationship, with higher industry complexity and discretion strengthening the TA–FD link. These findings support agency theory and the fraud triangle framework, indicating that managerial opportunism, facilitated by industry characteristics, can escalate fraudulent behaviors. This study provides important implications for regulators, auditors, and policymakers to incorporate both firm-specific and industry-level risk indicators in fraud prevention strategies.
References
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Wang, C., Wilson, R. J., Zhang, S., & Zou, H. (2022). Political costs and corporate tax avoidance: Evidence from sin firms. Journal of Accounting and Public Policy, 41(1), 106861. https://doi.org/10.1016/j.jaccpubpol.2021.106861
Wang, J., & Liu, S. (2022). The moderating role of depreciation and amortization in profitability and cash flow forecasting. Asia-Pacific Journal of Accounting & Economics, 29, 412–429.
Wang, W., Wang, H., & Wu, J. (George). (2021). Mixed ownership reform and corporate tax avoidance: Evidence of Chinese listed firms. Pacific-Basin Finance Journal, 69, 101648. https://doi.org/10.1016/j.pacfin.2021.101648
Wang, Y., Yu, M., & Gao, S. (2022). Gender diversity and financial statement fraud. Journal of Accounting and Public Policy. https://www.sciencedirect.com/science/article/pii/S0278425421000867
Wijaya, S., & Indriyani, K. (2025). Financial Statement Fraud: A Look at the Top Three. Account: Jurnal Akuntansi, Keuangan dan …. https://jurnal.pnj.ac.id/index.php/acc/article/view/7427
Wulandari, D. S., & Cahyonowati, N. (2024). A Bibliometric Examination of Studies on Corporate Tax Avoidance Utilizing Vosviewer Software. Jurnal Proaksi, 11(2).
Zhang, J., & Zhang, L. (2021). Tax management and corporate size: Evidence from Chinese firms. Journal of Accounting Research, 59(3), 809–835.
Zhang, X., Husnain, M., Yang, H., Ullah, S., Abbas, J., & Zhang, R. (2022). Corporate Business Strategy and Tax Avoidance Culture: Moderating Role of Gender Diversity in an Emerging Economy. Frontiers in Psychology, 13.
Zucman, G. (2024). International Tax Avoidance by Multinational Firms. NBER News. https://www.nber.org/reporter/2022number3/international-tax-avoidance-multinational-firms
Delgado, F. J., Fernández-Rodríguez, E., García-Fernández, R., Landajo, M., & Martínez-Arias, A. (2023). Tax avoidance and earnings management: A neural network approach for the largest European economies. Financial Innovation, 9(1), 19. https://doi.org/10.1186/s40854-022-00424-8
Duan, W., Hu, N., & Xue, F. (2024). The information content of financial statement fraud risk: An ensemble learning approach. Decision Support Systems. https://www.sciencedirect.com/science/article/pii/S0167923624000642
Gerged, A. M., Albitar, K., & ... (2023). Corporate environmental disclosure and earnings management—The moderating role of corporate governance structures. International Journal of …. https://doi.org/10.1002/ijfe.2564
Harman, S. A., & Bernawati, Y. (2021). Determinant of financial statement fraud: Fraud Pentagon perspective in manufacturing companies. Rigeo. https://rigeo.org/menu-script/index.php/rigeo/article/view/570
Jati, A., Ulum, I., & Utomo, C. (2019). Tax avoidance, corporate governance and financial performance of companies registered in the Jakarta Islamic Index. Jurnal Reviu Akuntansi dan Keuangan, https://202.52.52.7/index.php/jrak/article/view/8916
Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305–360. https://doi.org/10.1016/0304-405X(76)90026-X
Khuong, N., Liem, N. T., Thu, P., & khanh, T. H. (2020). Does corporate tax avoidance explain firm performance? Evidence from an emerging economy. Cogent Business & Management, 7(1780101).
Lestari, M. (2023). Taxes and Organizational Change: A Management Theory Review. Golden Ratio of Taxation Studies, 3(2), 56–66. https://doi.org/10.52970/grts.v3i2.634
Manry, D., Huang, H. W., & Yan, Y. C. (2023). Financial statement fraud litigation, material weaknesses, and board characteristics. Accounting Research Journal. https://doi.org/10.1108/arj-08-2022-0218
Nadhifah, M., & Arif, A. (2020). Transfer pricing, thin capitalization, financial distress, earning management, dan capital intensity terhadap tax avoidance dimoderasi oleh sales growth. Jurnal Magister Akuntansi Trisakti, http://trijurnal.lemlit.trisakti.ac.id/index.php/jmat/article/view/7731
Nguyen, T., Tran, P., & Pham, L. (2023). The Role of Sales Growth in Determining Capital Structure Decisions in Southeast Asian SMEs. International Journal of Finance & Banking Studies, 12(2), 78–90.
Ozkan, S., & and Alfarhan, L. (2025). Earnings manipulation and cash holdings: A Beneish M-score analysis in G7 nations. Cogent Business & Management, 12(1), 2502542. https://doi.org/10.1080/23311975.2025.2502542
Pangaribuan, H., HB, J. F., Agoes, S., & ... (2021). The Financial Perspective Study on Tax Avoidance. … Research and Critics …, https://repository.unai.edu/id/eprint/412/
Rahman, A., Deliana, D., & Rihaney, N. (2020). Detection of financial statement fraud triangle (fraud triangle) in LQ45 companies listed in Indonesia Stock Exchange. International Journal of …. https://journal.pktm.com.my/index.php/ijtvet/article/view/23
Ratmono, D., Darsono, D., & ... (2020). Financial statement fraud detection with beneish M-score and dechow F-score model: An empirical analysis of fraud pentagon theory in Indonesia. Dalam … Journal of Financial …. academia.edu. https://www.academia.edu/download/98961771/11975.pdf
Renaldo, N., & Veronica, K. (2024). The Role of Artificial Intelligence in Early Detection of Financial Statement Fraud in Digital Financial Institutions, AI-Fraud Behavior Integration Model. Dalam … Conference on Business Management and Accounting.
Sabatian, Z., & Hutabarat, F. M. (2020). The Effect of fraud triangle in detecting financial statement fraud. Dalam Jurnal Akuntansi. academia.edu. https://www.academia.edu/download/68838285/pdf.pdf
Sadjiarto, A., Hartanto, S., & Octaviana, S. (2020). Analysis of the Effect of Business Strategy and Financial Distress on Tax Avoidance. Journal of Economics and …, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3539036
Sánchez‐Ballesta, J. P., & Yagüe, J. (2021). Financial reporting incentives, earnings management, and tax avoidance in SMEs. Journal of Business Finance & …. https://doi.org/10.1111/jbfa.12519
Saraswati, E., & Agustina, I. (2022). Does bank governance reduce financial statement fraud? The moderating role of operational risk. Dalam Jurnal Keuangan Dan Perbankan. academia.edu. https://www.academia.edu/download/85893654/2022._Does_Bank_Governance_Reduce_Financial_Statement_Fraud_The_Moderating_Role_of_Operational_Risk._JKP.pdf
Tandean, V., & Winnie, W. (2016). The effect of good corporate governance on tax avoidance: An empirical study on manufacturing companies listed in IDX period 2010-2013. Asian Journal of Accounting Research, https://doi.org/10.1108/AJAR-2016-01-01-B004
Tanko, U. M. (2025). Financial attributes and corporate tax planning of listed manufacturing firms in Nigeria: Moderating role of real earnings management. Journal of Financial Reporting and Accounting, 23(3), 1024–1056. https://doi.org/10.1108/JFRA-05-2022-0198
Wang, C., Wilson, R. J., Zhang, S., & Zou, H. (2022). Political costs and corporate tax avoidance: Evidence from sin firms. Journal of Accounting and Public Policy, 41(1), 106861. https://doi.org/10.1016/j.jaccpubpol.2021.106861
Wang, J., & Liu, S. (2022). The moderating role of depreciation and amortization in profitability and cash flow forecasting. Asia-Pacific Journal of Accounting & Economics, 29, 412–429.
Wang, W., Wang, H., & Wu, J. (George). (2021). Mixed ownership reform and corporate tax avoidance: Evidence of Chinese listed firms. Pacific-Basin Finance Journal, 69, 101648. https://doi.org/10.1016/j.pacfin.2021.101648
Wang, Y., Yu, M., & Gao, S. (2022). Gender diversity and financial statement fraud. Journal of Accounting and Public Policy. https://www.sciencedirect.com/science/article/pii/S0278425421000867
Wijaya, S., & Indriyani, K. (2025). Financial Statement Fraud: A Look at the Top Three. Account: Jurnal Akuntansi, Keuangan dan …. https://jurnal.pnj.ac.id/index.php/acc/article/view/7427
Wulandari, D. S., & Cahyonowati, N. (2024). A Bibliometric Examination of Studies on Corporate Tax Avoidance Utilizing Vosviewer Software. Jurnal Proaksi, 11(2).
Zhang, J., & Zhang, L. (2021). Tax management and corporate size: Evidence from Chinese firms. Journal of Accounting Research, 59(3), 809–835.
Zhang, X., Husnain, M., Yang, H., Ullah, S., Abbas, J., & Zhang, R. (2022). Corporate Business Strategy and Tax Avoidance Culture: Moderating Role of Gender Diversity in an Emerging Economy. Frontiers in Psychology, 13.
Zucman, G. (2024). International Tax Avoidance by Multinational Firms. NBER News. https://www.nber.org/reporter/2022number3/international-tax-avoidance-multinational-firms
Published
2026-02-02
How to Cite
Dyah Permatasari, M., & Febriana, N. (2026). Industry Matters: The Impact of Business Nature on Tax Avoidance and Financial Fraud Dynamics . Jurnal Akuntansi Bisnis Pelita Bangsa, 10(02), 214-227. https://doi.org/10.37366/akubis.v10i2.3116
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Articles
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