Beyond integrity systems: The role of board governance in shaping corporate tax avoidance in global oil and gas companies

I Nyoman Putra Yasa; Gede Teguh Prasetya Muttiwijaya; Rikky Rundu Padang; I Dewa Gede Anom Jambe Adnyana

doi:10.31106/jema.v23i1.25119

Authors

I Nyoman Putra Yasa Department of Accounting, Faculty of Economics, Universitas Pendidikan Ganesha, Singaraja
Gede Teguh Prasetya Muttiwijaya Department of Accounting, Faculty of Economics, Universitas Pendidikan Ganesha, Singaraja
Rikky Rundu Padang Department of Management, Faculty of Economics, Universitas Pendidikan Ganesha, Singaraja
I Dewa Gede Anom Jambe Adnyana Department of Accounting, Faculty of Economics, Universitas Pendidikan Ganesha, Singaraja

DOI:

https://doi.org/10.31106/jema.v23i1.25119

Keywords:

Corporate Governance, Board Characteristics, Tax Avoidance, Financial Transparency, Anti-Corruption Practices

Abstract

Corruption and tax avoidance remain persistent governance challenges in the global oil and gas industry. Although prior studies have examined corruption, board governance, and tax avoidance separately, limited evidence explains how firm-level anti-corruption practices and board governance jointly shape corporate tax behavior in this high-risk industry. This study examines the effect of anti-corruption practices on tax avoidance and the moderating role of board characteristics using data from 100 large-cap publicly listed oil and gas companies over the 2021–2024 period. Partial Least Squares–Structural Equation Modeling (PLS-SEM) with SmartPLS is employed, while tax avoidance is measured using the Cash Effective Tax Rate (CETR). The results show that stronger anti-corruption practices significantly reduce tax avoidance. Board characteristics also significantly strengthen this relationship and exhibit a stronger association with tax avoidance than anti-corruption practices alone, suggesting that effective boards translate integrity systems into strategic tax decisions. These findings provide an integrated governance perspective by demonstrating that corporate tax behavior depends not only on anti-corruption practices but also on board governance capacity in complex multinational industries.

References

Aburajab, L., Maali, B., Jaradat, M., & Alsharairi, M. (2019). Board of directors' characteristics and tax aggressiveness: Evidence from Jordanian listed firms. Theoretical Economics Letters, 9(7), 2732–2745. https://doi.org/10.4236/tel.2019.97171

Agyemang, E., Boateng, A., & Du, M. (2021). Board structure and tax avoidance: Evidence from Sub-Saharan Africa. Journal of International Accounting, Auditing and Taxation, 42, 100377. https://doi.org/10.1016/j.intaccaudtax.2021.100377

Ajaz, T., & Ahmad, E. (2010). The effect of corruption and governance on tax revenues. The Pakistan Development Review, 49(4), 405–417. https://doi.org/10.30541/v49i4IIpp.405-417

Alkurdi, A., Hussainey, K., Tahat, Y., & Aladwan, M. (2020). Corporate governance and tax avoidance: Evidence from Jordan. Journal of Accounting in Emerging Economies, 10 (4), 673–690. https://doi.org/10.1108/JAEE-12-2018-0134

Alm, J., Martinez-Vazquez, J., & McClellan, C. (2016). Corruption and firm tax evasion. Journal of Economic Behavior & Organization, 124, 146–163. https://doi.org/10.1016/j.jebo.2015.10.006

Armstrong, C.S., Blouin, J.L., Jagolinzer, A.D., & Larcker, D.F. (2015). Corporate governance, incentives, and tax avoidance. Journal of Accounting and Economics, 60(1), 1–17. https://doi.org/10.1016/j.jacceco.2015.02.003

Armstrong, C.S., Blouin, J.L., & Larcker, D.F. (2012). The incentives for tax planning. Journal of Accounting and Economics, 53(1–2), 391–411. https://doi.org/10.1016/j.jacceco.2011.04.001

Barkemeyer, R., Preuss, L., & Lee, L. (2015). Corporate reporting on corruption: An international comparison. Accounting Forum, 39(4), 349–365. https://doi.org/10.1016/j.accfor.2015.10.001

Bear, S., Rahman, N., & Post, C. (2010). The impact of board diversity and gender composition on corporate social responsibility and firm reputation. Journal of Business Ethics, 97(2), 207–221. https://doi.org/10.1007/s10551-010-0505-2

Beer, S., de Mooij, R., & Liu, L. (2020). International corporate tax avoidance: A review of the channels, magnitudes, and blind spots. Journal of Economic Surveys, 34(3), 660–688. https://doi.org/10.1111/joes.12305

Bird, R., & Davis-Nozemack, K. (2018). Tax avoidance as a sustainability problem. Journal of Business Ethics, 151(4), 1009–1025. https://doi.org/10.1007/s10551-016-3162-2

Blanc, R., Cho, C. H., Sopt, J., & Branco, M. C. (2019). Disclosure responses to a corruption scandal: The case of Siemens AG. Journal of Business Ethics, 156(1), 103–121. https://doi.org/10.1108/CG-06-2022-0275

Cuervo-Cazurra, A. (2016). Corruption in international business. Journal of World Business, 51(1), 35–49. https://doi.org/10.1016/j.jwb.2015.08.015

Desai, M. A., & Dharmapala, D. (2006). Corporate tax avoidance and high-powered incentives. Journal of Financial Economics, 79(1), 145–179. https://doi.org/10.1016/j.jfineco.2005.02.002

Duhoon, A., & Singh, M. (2023). Corporate tax avoidance: a systematic literature review and future research directions. LBS Journal of Management & Research, 21(2), 197–217. https://doi.org/10.1108/LBSJMR-12-2022-0082

Dyreng, S. D., Hanlon, M., & Maydew, E. L. (2008). Long-run corporate tax avoidance. The Accounting Review, 83(1), 61–82. https://doi.org/10.2308/accr.2008.83.1.61

Elad, F. L, Wong, M. N., & Bongbee, N. S. (2018). The role of board characteristics in effective corporate governance: The case of Airbus group. International Journal of Social Sciences Perspectives, 2(1), 87–95. https://doi.org/10.33094/7.2017.2018.21.87.95

Elamer, A. A., Ntim, C. G., Abdou, H. A., Zalata, A. M., & Elmagrhi, M. (2020). The impact of multi-layer governance on bank risk disclosure. The International Journal of Accounting, 55(2), 1-37. https://doi.org/10.1142/S1094406020500079

Hanlon, M., & Heitzman, S. (2010). A review of tax research. Journal of Accounting and Economics, 50(2), 127–178. https://doi.org/10.1016/j.jacceco.2010.09.002

Hair, J. F., Hult, G. T. M., Ringle, C. M., & Sarstedt, M. (2022). A primer on partial least squares structural equation modeling (PLS-SEM) (3rd ed.). SAGE Publications.

Healy, P. M., & Serafeim, G. (2016). An analysis of firms' self-reported anticorruption efforts. The Accounting Review, 91(2), 489–511. https://dx.doi.org/10.2139/ssrn.2229039

Huseynov, F., & Klamm, B. K. (2012). Tax avoidance, tax management and corporate social responsibility. Journal of Corporate Finance, 18(4), 804–827. https://doi.org/10.1016/j.jcorpfin.2012.06.005

Huseynov, F., & Klamm, B. K. (2013). Tax avoidance, tax management and corporate social responsibility. Journal of Corporate Finance, 18(4), 804–827. https://doi.org/10.1016/j.jcorpfin.2012.06.005

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

Jizi, M. (2017). The influence of board composition on sustainable development disclosure. Business Strategy and the Environment, 26(5), 640–655. https://doi.org/10.1002/bse.1943

Joseph, C., Gunawan, J., Sawani, Y., Rahmat, M., Noyem, N., & Darus, F. (2016). Core values communication through corporate social responsibility (CSR) certification: The case of Malaysia and Indonesia. Management & Accounting Review, 15(1), 81–102. https://doi.org/10.22495/clgrv7i3sip8

Kaptein, M. (2011). Understanding unethical behavior by unraveling ethical culture. Human Relations, 64(6), 843–869. https://doi.org/10.1177/0018726710390536

Kovermann, J., & Velte, P. (2019). The impact of corporate governance on corporate tax avoidance: A literature review. Journal of International Accounting, Auditing and Taxation, 36, 100270. https://doi.org/10.1016/j.intaccaudtax.2019.100270

Kurnia, L., Saifi, M., & Damayanti, C. R. (2024). Corporate governance dynamics: How audit committees and board characteristics influence firm value through audit report lag?. JEMA: Jurnal Ilmiah Bidang Akuntansi Dan Manajemen, 21(1), 61–86. https://doi.org/10.31106/jema.v21i1.21790

Lanis, R., & Richardson, G. (2012). Corporate social responsibility and tax aggressiveness: An empirical analysis. Journal of Accounting and Public Policy, 31(1), 86–108. https://doi.org/10.1016/j.jaccpubpol.2011.10.006

Lanis, R., Richardson, G., Govendir, B., & Pazmandy, G. (2021). The effect of board of directors' expertise and tax avoidance on corporate debt. Accounting & Finance, 61(3), 4475–4511. https://doi.org/10.1111/acfi.12738

Lassou, P. J. C., & Hopper, T. (2016). Government accounting reform in an emerging economy: The case of Ghana. Accounting, Auditing & Accountability Journal, 29(6), 993–1017. https://doi.org/10.1108/AAAJ-01-2015-1933

Marquis, C., & Qian, C. (2014). Corporate social responsibility reporting in China: Symbol or substance? Organization Science, 25(1), 127–148. https://doi.org/10.1287/orsc.2013.0837

Minnick, K., & Noga, T. (2010). Do corporate governance characteristics influence tax management? Journal of Corporate Finance, 16(5), 703–718. https://doi.org/10.1016/j.jcorpfin.2010.08.005

Nainggolan, Y.A., Siregar, S.V., & Wardhani, R. (2021). Corporate governance and tax avoidance: Evidence from Indonesia. Asian Journal of Accounting Research, 6(1), 1–12. https://doi.org/10.1108/AJAR-02-2020-0008

Prawira, I. F. A (2017). Corporate governance and tax aggressiveness: Eevidence on manufacturing companies in Indonesia. International Journal of Accounting and Economics Studies, 5(2), 134-140. https://doi.org/10.14419/ijaes.v5i2.8132

Rakia, R., Kachouri, M., & Jarboui, A. (2024). The moderating effect of women directors on the relationship between corporate social responsibility and corporate tax avoidance? Evidence from Malaysia. Journal of Accounting in Emerging Economies, 14(1), 1–24. https://doi.org/10.1108/JAEE-01-2021-0029

Richardson, G., Wang, B., & Zhang, X. (2016). Ownership structure and corporate tax avoidance: Evidence from publicly listed private firms in China. Journal of Contemporary Accounting & Economics, 12(2), 141–158. https://doi.org/10.1016/j.jcae.2016.06.003

Scott, W. R. (2014). Institutions and organizations: Ideas, interests, and identities. SAGE Publications.

Shahzad, K., Ali, R., & Rehman, R.U. (2024). Corporate governance and firm's risk behavior: the moderating role of corporate social responsibility. Managerial Finance, 50(7), 1324–1343. https://doi.org/10.1108/MF-04-2023-0265

Sovacool, B. K., Walter, G., Van de Graaf, T., & Andrews, N. (2020). Energy governance, corruption, and the (in)visibility of small-scale energy systems. Energy Research & Social Science, 68, 1-14. https://doi.org/10.1016/j.erss.2020.101581

Organization for Economic Co-operation and Development. (2016). Corruption in the Extractive Value Chain: Typology of Risks, Mitigation Measures and Incentives. OECD Publishing.

Transparency International. (2021). Corruption Perceptions Index 2021.

Transparency International. (2022). Global Corruption Report: Oil and Gas Sector.