Accounting Analysis Journal 8(2) (2019) 81-87

Accounting Analysis Journal

https://journal.unnes.ac.id/sju/index.php/aaj

The Effects of Leverage, Executive Characters, and Institutional Ownership

to Tax Avoidance With Political Connection as Moderation

Fifi Setya Maharani*1 and Niswah Baroroh2

Accounting Department, Faculty of Economics, Universitas Negeri Semarang
1,2

ARTICLE INFO ABSTRACT

Article History: This study aims to examine the effects of leverage, executive character, and institu-
Received April 3, 2019 tional ownership on tax avoidance with political connection as moderating variable.
Accepted July 1, 2019 The population was 48 mining companies listed in the Indonesia Stock Exchange dur-
Available July 30, 2019 ing the period of 2014-2017. The sampling method was purposive sampling method
and selected 52 units of analysis from 14 companies. Analysis of research data used
descriptive statistics and inferential statistics. The hypothesis testing used a moderating
Keywords:
regression analysis with an absolute difference test. The results show that leverage has
tax avoidance; leverage; a significant negative effect while executive character and institutional ownership have
executive character; no effect on tax avoidance. Then, political connection significantly moderates the effect
institutional ownership; of leverage and executive character but it does not significantly moderate the effect of
political connection institutional ownership on tax avoidance. The conclusion of this research is only lever-
age which has effect on tax avoidance and political connection only moderates the effect
of leverage and executive character on tax avoidance.

© 2019 The Authors. Published by UNNES. This is an open access

article under the CC BY license (http://creativecommons.org/licenses/by/4.0/)

INTRODUCTION
The definition of tax according to the Law of that the realization that was less than this target could
the Republic of Indonesia Number 16 Year 2009 article be interpreted that the Director General of Taxes still
1 paragraph 1 is a mandatory contribution to the sta- needed to optimize their tax revenue.
te owed by individuals or entities that are forced based In 2016, the Director General of Taxes revealed
on the law, with no direct compensation and used for the motives of 2000 multinational companies that were
the needs of the state for the greatest prosperity of the identified as not compliant with taxes. On the average,
people. Countries (tax authorities) and companies (ta- the companies did not deposit income tax articles 25
xpayers) have different interests. One of the sources of and 29 because they were experiencing continuous los-
state revenue to fund its expenses is from taxes but tax ses even though the company still exists (Sari, 2016). Ot-
for the company is an expense. Expenses can reduce net her indications that show the existence of tax avoidance
income so companies try to minimize taxes. Therefore, practices in Indonesia can also be seen from the existen-
companies tend to reduce tax burden both illegally and ce of the tax amnesty program. Based on the 2018 state
legally (Suandy, 2017). budget, the results of the tax amnesty program include
Efforts by legal means are called tax avoidan- a repatriation of assets amounted to Rp 146 trillion and
ce while illegal efforts are called tax evasion (Suandy, a ransom of Rp 116 trillion (Ministry of Finance, 2018).
2017). Furthermore, Suandy (2017) explained that tax Richardson et al. (2016) have examined the effect
avoidance is a tax engineering that still remains in the of leverage on tax avoidance. The findings show that
taxation regulations (lawful). One of the efforts of tax leverage has a positive effect on tax avoidance. Their
avoidance is reflected in the realization of tax revenues results are supported by research conducted by Lestari
each year that never reach the target. In addition, the & Putri (2017). On the other hand, research from Turya-
achievement of tax revenue realization from 2013 to tini (2017); Swingly & Sukartha (2015) and Wang et al.
2016 also decreased. Swingly & Sukartha (2015) said (2014) found that leverage has a negative effect on tax
avoidance.
* E-mail: fifisetyamaharani@gmail. Research on the effect of executive character on
Address: L2 Building 2nd floor, Campus Sekaran, Gunungpati,
Semarang, Indonesia, 50229 tax avoidance was conducted by Swingly & Sukartha

DOI 10.15294/aaj.v8i2.30039 p-ISSN 2252-6765 e-ISSN 2502-6216

 Accounting Analysis Journal 8(2) (2019) 81-87 82
(2015). The results of this study indicate that executive ny may increase its debt level if the benefits are getting
character has a positive effect on tax avoidance. The re- higher and remain balanced with the cost of financial
search is in line with research from Dyreng et al. (2010). difficulties that the company will incur. As long as there
However, research conducted by Tandean & Winnie is a balance between the use of debt and the cost of finan-
(2016) and Praptidewi & Sukartha (2016) show the op- cial difficulties, leverage can be used to avoid taxes be-
posite result, which is a negative effect on tax avoidance. cause there is an interest expense. When the company’s
Research conducted by Jamei (2017) and Tandean interest expense increases, the earning before tax of the
& Winnie (2016) has resulted in findings that institutio- company will decrease. This resulted in a lower tax bur-
nal ownership has no significant effect on tax avoidance. den. This hypothesis is in line with the results of the
Their findings were caused by the lack of adequate su- studies conducted by Richardson et al. (2016), Lestari
pervision to the performance of institutional investors & Putri (2017) and Putri & Putra (2017) which indicate
which are mostly companies and government institu- that leverage has a positive effect on tax avoidance.
tions. Meanwhile, research conducted by Khurana &
Moser (2013), Putri & Putra (2017) and Mappadang et H1: Leverage has a positive significant effect to tax
al. (2018) show the negative effect. avoidance.
This study aims to examine the effects of leverage, Company executives greatly contribute to the
executive character, and institutional ownership on tax running of the company because they have the highest
avoidance with political connections as a moderator in position in decision-making. Executives have two cha-
mining companies in the 2014-2017 period. The novelty racters namely risk taker or risk averse. This is reflected
of this research is the presence of political connections in company risk. The greater the risk of the company,
as the moderating variable. Adhikari, et al. (2006) defin- the more executives are risk takers (Paligorova, 2010).
ed political connections as to whether there is a direct In agency theory, principals will try to maximize
ownership from the government or not in a company. profits while agents will try to increase compensation.
Political connection is chosen as the moderation variab- Principals will assign agents to realize their goals. Then,
le because according to Tehupuring & Rossa (2016) the company executives (agents) as the highest-ranking lea-
business world is very closely related to politics. When ders will be more willing to decide risky things, one of
a company is politically connected, the company will be which is avoiding taxes to reduce tax burden. The more
monitored directly by the government in each manager’s executives are risk takers, the braver they are to realize
behavior and business decisions made. their goals despite the risks. Profit after tax can increase
The implication of agency theory related to tax when the agents manage to reduce the tax burden. This
avoidance is a conflict of interest between shareholders will make the compensation received by the agents in-
and managers and a conflict of interest between tax col- crease. This hypothesis is supported by research con-
lectors (tax authorities) and taxpayers (companies). Ma- ducted by Surachman (2017), Swingly & Sukartha
nagers will make every effort to increase the compensa- (2015) and Dyreng et al. (2010) which say that executive
tion they get while shareholders will try to increase their character has a positive effect on tax avoidance.
return. On the other hand, tax collectors (tax authori-
ties) want to increase the source of state revenue in the H2: Executive character has a significant positive
form of tax while taxpayers (companies) want to reduce effect on tax avoidance.
tax burden by maximizing profits. Investors always want maximum profit so that
The trade off theory states that the use of debt is they receive large dividends. However, it is different
indeed a tax deduction because debt will incur interest from institutional investors. They will continue to super-
costs. However, if the debt is too high, the level of cost vise managers in generating profits because they prefer
of financial distress will also increase (Brigham & Hous- the company to remain abiding by the rules (Wulansari,
ton, 2013). The higher the level of debt, the higher the 2015). Institutional ownership in agency theory plays
interest costs incurred by the company which will cause an important role regarding agency problems (Jensen
a small opportunity to be able to repay its debts (Wu- & Meckling, 1976). One of the efforts to minimize this
lansari & Dewi, 2017). Companies will report earnings problem is the presence of an external party or institu-
well in order to remain considered healthy by creditors. tion.
Therefore, companies may use debt to reduce the tax
Institutional ownership is company external which
burden, but only up to a certain point.
is able to influence manager’s actions because the institu-
One of the ways to avoid taxes is leverage because
tion has the role to oversee the manager’s opportunistic
there is an element of interest expense in it. According
actions including taxation. The higher level of institutio-
to the Law Number 36 Year 2008, interest derived from
nal share ownership will encourage managers to be more
debt can reduce profits due to tax burden. Agency the-
compliant with taxation rules. The role of the instituti-
ory in the relationship of leverage with tax avoidance is
on encourages managers to present the correct tax bur-
the existence of interests between principals and agents
den. This hypothesis is supported by studies conducted
where the principals want optimal company performan-
by Khurana & Moser (2013), Putri & Putra (2017), and
ce as reflected in earnings while the agents want higher
Mappadang et al. (2018) which found that institutional
compensation. One of the ways to achieve optimal ear-
ownership has a negative effect on tax avoidance.
ning is to use debt to fund the company.
The trade off theory in this case is that a compa- H3: Institutional ownership has a significant nega-
83 Fifi Setya Maharani and Niswah Baroroh, The Effects of Leverage, Executive Characters, and Institutional Ownership...

tive effect on tax avoidance. practice of tax avoidance within the company.
The relationship of leverage with tax avoidance H5: Political connection significantly moderates the
in agency theory is the different interests between princi- effect of executive character on tax avoidance.
pals and agents where they both want to prosper them-
Every investor definitely would expect a high re-
selves. One of the strategies is to use a fixed burden in
turn but different from institutional investors. They will
the form of interest arising from debt to minimize tax
continue to supervise the managers because they prefer
burden. Some companies have political connections sig-
the company to obey the rules (Wulansari, 2015). In-
ned by direct ownership from the government (Adhikari
stitutional ownership plays a role in minimizing agency
et al., 2006). Companies that are more controlled by the
conflicts between principals and agents (Jensen & Meck-
government is that having political connections.
ling 1976). The higher the institutional ownership, the
One of the policies monitored by the government
higher the supervision to the manager’s performance,
is funding policy through debt. The government as a
one of which is the company’s tax burden. Thus, high
principal will ensure that the debt owned by the compa-
institutional ownership will result in high corporate tax
ny does not exceed the provisions, even though the com-
burden (Putri & Putra, 2017).
pany with political connections will get benefits such as
The indications of political connection according
the ease of getting a loan. The government has issued a
to Adhikari et al. (2006) marked by the existence of di-
policy regarding the limitation of capital structure com-
rect ownership from the government. When a company
parison owned by companies, namely PMK Number
is connected politically, it will be directly monitored by
169/PMK.010/2015 Regarding Determination of the
the government. The existence of supervision from in-
Amount of Comparison between Debt and Company
stitutional and government investors will encourage ma-
Capital for the Need for Income Tax Calculation. The
nagers to avoid their opportunistic behavior so that ma-
amount of the ratio limit of the corporate capital struc-
nagers will remain compliant with applicable taxation
ture is 4: 1. Therefore, political connection is able to
rules. Thus, companies tend to have low tax avoidance.
encourage the level of corporate leverage to remain in
accordance with applicable regulations. H6: Political connection significantly moderates the
effect of institutional ownership on tax avoid-
H4: Political connection significantly moderates the
ance.
effect of leverage on tax avoidance.
Company executives play an important role to the
RESEARCH METHOD
running of the company in terms of decisions to prac-
tice tax avoidance. Based on agency theory, principals The population in this study were mining com-
and agents will try to maximize their personal benefits. panies listed on the Indonesia Stock Exchange (IDX)
Principals will try to increase earnings while managers for the 2014-2017 periods with a total of 48 companies.
will try to increase compensation. Then, to increase The sample selection was carried out by applying pur-
compensation, executives as leaders will dare to decide posive sampling technique, so that 14 companies were
on something risky such as avoiding taxes to reduce the obtained. Outlier data detection was done with a limit
tax burden. value of 2.5. Unit of analysis data is declared outlier if
The business world is very closely related to po- the variable z-score was more than 2.5 and less than -2.5.
litics (Tehupuring & Rossa, 2016). When a company is Sample selection criteria can be seen in Table 1.
politically connected, it will be directly monitored by the The dependent variable in this study is tax avoi-
government in every behavior and decision made. The- dance. The independent variables are leverage, executi-
refore, executives will tend not to take high-risk actions, ve character, and institutional ownership and political
one of which is the tax burden paid by the company. connections as moderation variable. The variable of
Executives will be more careful in deciding something tax avoidance in this study will be multiplied by -1 to
especially regarding taxation and will tend to obey the make it easier to interpret the results of the study. This is
applicable taxation rules. This has an impact on the low due to the lower the ETR means the higher the practice
Table 1. Sample Selection Criteria
Criteria of Sample Beyond Criteria Meeting criteria
Mining companies listed on the IDX in 2017 48
Mining companies listed on the IDX successively in 2014-2017 (5) 43
Companies that disclosed annual reports for 2014-2017 (6) 37
Companies that experienced profits during 2014-2017 (21) 16
Companies that did not receive tax benefits during 2014-2017 (2) 14
Number of Samples 14
Number of research analysis units (14 x 4) 56
Outlier data during the observation year 4
Final amount of research analysis units year 2014-2017 52
Source: secondary data processed, 2019
 Accounting Analysis Journal 8(2) (2019) 81-87 84

Table 2. The Operational Definitions of Variables

No Variables Operational Definitions Measurement
1 Tax Avoidance Tax engineering that still remains in (Hanlon & Heitzman, 2010)
(TA) the tax regulations (lawful) (Suandy,
2017).
2 Leverage (LEV) Financial ratio that describes the (Putri & Putra, 2017)
relationship between a company’s
debt to capital and assets (Putri &
Putra, 2017)
3 Executive Charac- The character of a company leader (Paligorova, 2010)
ter (RISK) who has a role as a policy maker
characterized as a risk taker or risk
averse (Low, 2006)
4 Institutional Own- The proportion of share ownership (Khurana & Moser, 2009)
ership (KI) held by an institution such as insur-
ance, banks, or other institutions
(Tandean & Winnie, 2016)
5 Political Connec- Circumstances where in the compa- - Score 1 if there is a minimum of 25%
tion (KP) ny there is direct ownership from the government ownership of shares
government (Adhikari et al., 2006). - Score 0 if there is no government share
ownership of at least 25%(Lestari & Putri,
2017).
Source: processed from various sources, 2019
of tax avoidance, and vice versa (Lanis & Richardson, low, low, medium, high, and very high. Based on this divi-
2012). The operational definitions of each variable are sion, the highest percentage of TA of 84.62% is in the high
explained in Table 2. category. The highest percentage of LEV of 48.08% is in
The data collection method used the documenta- the low category. The highest percentage of RISK is in the
tion method. Data obtained from the IDX website and low category at 46.15%. Then, the highest presentation of
the site of each company in the form of annual reports KI at 46.15% is in the very high category while the rest is
in the observation period, 2014-2017. Hypothesis tes- distributed in various categories.
ting used descriptive statistical analysis techniques and The classical assumption test aims to examine the
inferential statistical analysis techniques. Before testing feasibility of the regression equation model. The normality
hypotheses, the research data was examined on classical test uses one-sample Kolmogorov-Smirnov shows the value
assumptions first. The hypothesis is tested using a mo- of Asymp.Sig. equal to 0.20 which means more than the
deration regression analysis, namely the test of absolute 0.05 significance level so that the data are normally distri-
difference value with a significance level of 5%. In tes- buted. The multicollinearity test shows that the tolerance
ting the absolute difference value, the data values on the value> 0.10 and VIF value <10 so that it can be concluded
independent and moderation variables are changed to if the independent variable does not have multicollineari-
the z-score. ty problems. The heteroscedasticity test which uses white
test concludes that there is no heteroscedasticity problem
RESULTS AND DISCUSSIONS due to the value of c2 count (45.084) smaller than c2 table
Descriptive statistics of this study use the maximum, (68.67). Then, the result of autocorrelation test with the
minimum, mean, and standard deviation values. TA has a Durbin Watson test shows that there is no autocorrelation
maximum value of -0.070, a minimum value of -2.300, a because the dw value is 1.924. The dw value is between the
mean value of -0.411, and a standard deviation value of dU value (1.6769) and 4-dU (2.3231).
0.315. LEV has a maximum value of 2.226, a minimum The results of the coefficient of determination in-
value of 0.169, a mean value of 0.803, and a standard dicate that the adjusted R2 value of 0.29 means that the
deviation of 0.490. Furthermore, RISK has a maximum variables of LEV, RISK, KI, and KP are able to explain
value of 0.089, a minimum value of 0.002, a mean value of the variation of tax avoidance by 29% while the remaining
0.025, and a standard deviation 0.013. The KI variable has 71% is explained by other variables outside the model.
a maximum value of 0.978, a minimum value of 0.260, a Based on the hypothesis testing, it can be written regression
mean value of 0.733, and a standard deviation of 0.218. equation 1 as follows:
Then, politically connected mining companies as many as
8. Mining companies that are not connected by politics are TA = -0.537 – 0.173 ZLEV – 0.077 ZRISK + 0.053
44 companies. ZKI + 0.147 |LEV-KP| - 0.174 |RISK-KP|
Furthermore, the results of descriptive statistical + 0.15 .................................................... (1)
analysis are divided into 5 interval classes, namely very
85 Fifi Setya Maharani and Niswah Baroroh, The Effects of Leverage, Executive Characters, and Institutional Ownership...

Table 3. The Results of Hypothesis Test

Regression
No Hypothesis Sig. Decisions
Coefficient
1 H1: Leverage has a significant positive effect on tax avoidance. -0.173 0.007 Rejected
2 H2: Executive character has a significant positive effect on tax avoid-
-0.077 0.125 Rejected
ance.
3 H3: Institutional ownership has a significant negative effect on tax
0.053 0.226 Rejected
avoidance.
4 H4: Political connection significantly moderates the effect of leverage
0.147 0.029 Accepted
on tax avoidance.
5 H5: Political connection significantly moderates the effect of executive
-0.174 0.002 Accepted
character on tax avoidance.
6 H6: Political connection significantly moderates the effect of institu-
0.150 0.070 Rejected
tional ownership on tax avoidance.
Source: secondary data processed, 2019

The results of the hypothesis testing in this study Wulandari, 2018). The result of this study is in line with
are presented in Table 3. studies conducted by Kartana & Wulandari (2018), Ma-
yangsari (2015) and Kiswanto et al. (2016) which found
The Effect of Leverage to Tax Avoidance that executive character has no significant effect on tax
The result of the study shows that leverage has avoidance.
a negative effect on tax avoidance. The result gives the
The Effect of Institutional Ownership on Tax Avoid-
meaning that when leverage increases, the practice of
ance
tax avoidance also increases. This finding is contrary to
agency theory where principals employ agents to take The result of the study shows that institutional
care of companies in order to achieve maximum profits. ownership has no significant effect on tax avoidance.
In addition, this result is also not in accordance with the The result of this study contradicts the agency theory
trade off theory which states that companies can use which states that institutional ownership plays a role in
debt to save tax. supervising the performance of managers. In the fre-
The frequency distribution in the research results quency distribution of research data, institutional ow-
supports this negative relationship where the level of nership in most of the companies is in the very high
debt is mostly in the low category (48.08%) while the category (46.15%) and the rest (53.85%) is distributed
level of tax avoidance is mostly in the very high catego- in various categories in all categories (very low, low, me-
ry (84.62%). This shows that there is a possibility that dium, and high). Meanwhile, the level of tax avoidance
the benefits of fixed costs appear is a little so that the is mostly in the very high category (84.62%). It is assu-
company decided not to use debt to fund the company. med that the institutions do not carry out its supervisory
Companies that have low levels of debt do not have the function sufficiently.
obligation to provide creditors with broader and more Putri & Suryarini (2017) state that this happens
detailed information (Turyatini, 2017) so they have the because institution is an external party of the compa-
ease of doing tax avoidance. The results of this study are ny so that its existence cannot directly influence mana-
in line with research conducted by Irianto et al. (2017) gement regarding tax avoidance actions. The existence
finance and management which may disperse producti- of institutional ownership will make managers increa-
on, yet need (relatively few, Turyatini (2017), Swingly & singly avoid tax because of the responsibility to inves-
Sukartha (2015), and Wang et al. (2014). tors (Tandean & Winnie, 2016). Management considers
that the company must provide feedback on the shares
The Effect of Executive Character to Tax Avoidance owned by the institution remains high. The results of
The result of the study shows that the executive this study are in line with research conducted by Tande-
character does not significantly influence tax avoidance. an & Winnie (2016), Jamei (2017), Turyatini (2017),
This finding is contrary to agency theory which explains and Putri & Suryarini (2017).
that principals and agents will try to maximize their per-
The Effect of Leverage on Tax Avoidance moderated
sonal profit by maximizing profits. Thus, they tend to be
by Political Connections
more courageous in making decisions despite the high
risk. The result of the study shows that political con-
Then, every company has a goal to maximize nection is able to moderate the effect of leverage on tax
profits, one of the strategies is to minimize the tax bur- avoidance. This result is in line with agency theory that
den. So, whatever the character of the executive (risk explains the interests between principals and agents who
taker or risk averse) will still make the executives take both want to prosper themselves which can be realized
the policy to do tax avoidance even though there is a by maximizing profits. One of the ways to achieve ma-
risk of sanctions or a decline in reputation (Kartana & ximum profit is by utilizing interest expense arising from
 Accounting Analysis Journal 8(2) (2019) 81-87 86

debt to minimize tax burden. role in overseeing the company’s tax avoidance actions.
Leverage has a negative effect on tax avoidance. The presence or absence of government ownership will
Then, the presence of political connection in this study still make the institution want a high return so that it will
is able to weaken the negative effects. Companies with make managers avoid taxes because of the responsibility
political connections have a low risk in terms of tax to investors.
avoidance so that it can reduce the tax burden compared This finding is supported by research data where
to companies that are not connected by politics (Tehu- one of the sample companies, namely PT BSSR in 2015,
puring & Rossa, 2016). Although the government is also has only 0.26 shares and no government ownership. The
on duty to monitor the companies, the government also company has tax avoidance with a very high category of
wants to get high returns in the form of dividends. The- -0.277. Then, the ownership of PT PTBA institutions in
refore, the level of tax avoidance of politically connected 2017 amounted to 0.9789 and there was a political con-
companies tends to be high when the level of leverage nection in the form of government ownership of 0.6502.
is also high. This can be proven in this research data However, it still makes this company do tax avoidance
where the leverage of PT TINS (has political connec- without being affected by government ownership. PT
tions) is higher than politically unconnected companies. PTBA has a tax avoidance level with a very high catego-
However, based on the research data, the leverage on ry that is equal to - 0.256.
the companies that have political connections does not
exceed the provisions. This means that the government CONCLUSIONS
also continues to play a role in controlling the level of
corporate leverage to remain in accordance with the pro- This study examines the effects of leverage, exe-
visions. cutive character, and institutional ownership on tax
avoidance with political connection as moderator. The
The Effect of Executive Character to Tax Avoidance result of the study proves that the lower the leverage,
moderated by Political Connection the tax avoidance by the company will be higher. The
result indicates that companies with low debt levels do
The result of the study shows that political con- not have the obligation to provide detailed information
nection is able to moderate the relationship between to creditors so they have the ease of doing tax avoidance.
executive character and tax avoidance. This finding is Then, executive character and institutional ownership
in line with agency theory that explains the differences do not affect tax avoidance. Furthermore, political con-
in interests between agents and principals in maximi- nections moderate the effects of leverage and executive
zing profits. However, the government in this case as the character on tax avoidance, but do not moderate the ef-
principal and the state apparatus expects the company to fect of institutional ownership on tax avoidance.
comply with the rules. Therefore, the executives will be The existence of political connections will encou-
encouraged to be very careful in deciding matters becau- rage companies to increase tax avoidance because the
se of political connections. government also wants to get high dividends. Neverthe-
The executive character has a negative but insig- less, political connections also play a role in controlling
nificant effect on tax avoidance. Then, the presence of the level of leverage in order to remain in compliance.
political connection is able to strengthen the negative Then, the existence of political connections will make
effect so that the more executives with the character executives who risk takers tend to reduce tax avoidance
of risk takers, the lower the practice of tax avoidance. because of direct supervision from the government.
The financial statements will be presented as the factu- Suggestions for the government are expected to
al conditions if the company tends to be at high risk. supervise mining companies regarding tax avoidance
That is because the principal knows how the company’s practices because these companies tend to do tax avoi-
performance is, so the opportunity to do tax avoidan- dance to maximize after-tax profits. Then, companies
ce is low (Praptidewi & Sukartha, 2016). Furthermore, with high leverage are expected to avoid tax avoidan-
companies that are politically connected will be super- ce practices because of tighter controls from creditors.
vised directly by the government. Thus, executives will In addition, this research has limitations, namely only
tend not to do tax avoidance. The government, as the obtaining information on political connections from the
principal, will oversee the company executives so that annual report. Thus, the suggestion for further resear-
decisions made in tax avoidance do not jeopardize their
chers is to try to use other proxies in measuring politi-
reputation.
cal connections as suggested by Adhikari et al. (2006)
where political connections can be measured based on
The Effect of Institutional Ownership to Tax Avoid-
the presence or absence of agents or principals who are
ance moderated by Political Connection
political officials or former political officials.
The result of the study proves that political con-
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