The role of XBRL adoption on the association between managerial ability and corporate tax outcomes: empirical evidence from Indonesia
Journal of Applied Accounting Research
ISSN: 0967-5426
Article publication date: 16 June 2022
Issue publication date: 14 March 2023
Abstract
Purpose
This study examines the moderating effect of XBRL mandatory adoption on the association between managerial ability and corporate tax outcomes.
Design/methodology/approach
This study used a quantitative method with panel data regression models using a sample of listed firms on the Indonesia Stock Exchange from 2010 to 2019.
Findings
The regression results indicate that XBRL adoption moderates the relationship between managerial ability on tax avoidance and tax risk. Firms with higher managerial ability have relatively greater tax avoidance practices and lower tax risk following XBRL adoption. In this study, the authors document unfavorable and unexpected consequences of XBRL in an emerging country.
Research limitations/implications
Results are from a sample of firms from one emerging country.
Practical implications
It becomes important and necessary to develop more and better taxonomies with standardized extensions related to taxes information in the XBRL financial reporting to support the tax administrator’s performance in assessing firms’ tax avoidance and tax risk. The authors underscore the importance of improving taxes tags, including tags from financial statements and the disclosure section. This study may also inform policymakers in other countries that more adequate tax tags are needed to leverage benefit from XBRL adoption in monitoring and assessing corporate tax avoidance and tax risk.
Originality/value
This study is among the first to test an explanation for the moderating role of XBRL adoption on the association between managerial ability and corporate tax avoidance and tax risk.
Keywords
Acknowledgements
The authors would like to thank the editor and the anonymous reviewers for the helpful and valuable comments and recommendations. The authors would like to thank the Lab of Accounting, Department of Accounting, Faculty of Economics and Business, Universitas Gadjah Mada for providing database and proofreading services (Grant 2021) and the Department of Fiscal Administration, Faculty of Administrative Sciences, Universitas Indonesia for supporting proofreading services. Arfah Habib Saragih gratefully acknowledges the support received by the Domestic Postgraduate Education Scholarship during doctoral studies (provided by the Ministry of Research, Technology and Higher Education of the Republic of Indonesia).
Citation
Saragih, A.H. and Ali, S. (2023), "The role of XBRL adoption on the association between managerial ability and corporate tax outcomes: empirical evidence from Indonesia", Journal of Applied Accounting Research, Vol. 24 No. 2, pp. 217-234. https://doi.org/10.1108/JAAR-10-2021-0267
Publisher
:Emerald Publishing Limited
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