International Journal of Accounting & Finance Review

MODERATING EFFECT OF BOARD INDEPENDENCE ON THE RELATIONSHIP BETWEEN FIRM ATTRIBUTES AND TAX AGGRESSIVENESS: EMPIRICAL EVIDENCE FROM THE NIGERIAN BANKS

Kolawole Ebire — 2024-02-06

Despite increased evidence of the critical role of corporate governance in shaping business behaviour, there is still a lack of understanding of how board independence moderates the relationship between firm qualities and tax aggression, particularly in the context of Nigerian banks. This study examines the moderating effect of board independence on firm attributes and tax aggressiveness relationship in Nigerian banks spanning 2012 to 2022. The firm attribute was proxy as firm size, profitability, leverage, and board independence, while tax aggressive was proxy as the effective tax rate. The data was collected from eleven listed commercial banks in Nigeria. Data analysis were performed using random effects based on the Hausman test. The study concludes that larger banks tend to engage less in tax aggressive strategies than smaller banks. Also, boards with more independent directors tend to be less aggressive in tax activities. In addition, the study concludes that highly leveraged firms have a greater interest in minimising taxes to enhance cash flows available for debt service. Furthermore, when the moderating effect of board independence is introduced, the study concludes that the relationship between profitability and tax aggressiveness was insignificant. Furthermore, larger banks engage in tax aggressiveness when independent directors are involved. More so, the moderating effect of board independent directors will cause a reduction in tax aggressiveness as leverage increases. The study suggest that banks management be encouraged to conduct benchmarking exercises and peer comparisons to assess their tax practices to industry standards. This can help identify outliers and promote a more standardised and responsible approach to tax planning.

JEL Classification Codes: M4, M41, M480.

SUSTAINABILITY REPORTING AND SHAREHOLDERS’ INVESTMENT DECISIONS IN AFRICA

Chinanu Emmanuel — 2024-11-29

Shareholders’ investment decisions are fraught with several challenges that undermine their optimality and pose detrimental effects to firms on the long run. Sustainability reporting by firms is advanced as a mechanism that drives the efficacy of investors’ decisions. This study investigates the effect of sustainability reporting on shareholders’ investment decisions in Africa. Quantitative research was employed using panel data sourced from the year end reports and financial statements of the sampled firms for a period of 20 years spanning 2004-2023. Descriptive and inferential statistics was deployed to test the collated data and multiple regression was used to estimate the model. The measures of sustainability reporting used are environmental sustainability performance disclosure, social sustainability performance disclosure and governance sustainability disclosure. Shareholders’ investment decisions was proxied by dividend payout ratio and return on equity. Management quality was adopted as a moderating variable. The findings of the study reveal that environmental sustainability performance disclosure and governance sustainability performance disclosure have insignificant positive effect on return on equity, social sustainability performance disclosure has insignificant negative effect while management quality has significant negative effect on return on equity. Environmental Performance Disclosure has insignificant positive effect on dividend payout ratio, social performance disclosure has insignificant negative effect on dividend payout ratio, and governance performance disclosure has significant positive effect while management quality has significant negative effect. The results depict that the measures of sustainability reporting jointly have significant effect on return on equity and dividend payout ratio in models 1 & 2 respectively. The findings demonstrate that sustainability reporting is a significant factor that enhances shareholders’ investment decisions.

JEL Classification Codes: G11, Q56, G3.

REVEALING THE ROLE OF FINANCIAL MANAGEMENT IN THE ANTECEDENT OF AUDIT QUALITY IN THE AUTOMOTIVE SECTOR IN INDONESIA

Etty Indriani — 2024-11-29

Audit quality, as an important element to maintain investor trust, is influenced by financial management factors such as financial ratios, intellectual capital, and dividend policy. However, empirical research examining the influence of these factors on audit quality in the Indonesian automotive sector is still limited. This study aims to analyze the relationship between financial ratios, intellectual capital, and dividend policy on audit quality in automotive companies listed on the Indonesia Stock Exchange during the period 2013–2021. Secondary data used include financial information, dividend policy, intellectual capital (measured by the number of employees, level of innovation, and research and development activities), and audit quality based on external auditor assessments. This study uses a quantitative approach with the logistic regression method to test the significant effect of the three variables on audit quality, considering control variables such as company size and operational complexity. The results show that financial ratios, intellectual capital, and dividend policy contribute significantly to audit quality. These findings provide significant implications for investors, capital market authorities, regulators, and company management. For investors, the results of this study can be used as a guide in assessing the audit quality of automotive companies, thus impacting their investment decisions. Meanwhile, for company management, these results are an encouragement to improve the quality of financial reporting. Thus, improvements in corporate governance and oversight mechanisms will contribute to the creation of a more transparent, accountable, integrity-based, and sustainable business environment, which not only improves the company's reputation but also supports the long-term growth of the Indonesian automotive industry in the global market.

JEL Classification Codes: C12, G320, M42, N65.