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Articles
Articles
Capital Structure and Social Signaling: A Dual Mechanism Analysis of Tax Aggressiveness in Emerging Markets
Happy Tatemba, Prayanthi
View Author Affiliations
- Happy Tatemba: Universitas Klabat., Indonesia
- Prayanthi: Universitas Klabat., Indonesia
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Abstract
Purpose This research investigates the influence of capital structure and social signaling on corporate tax behavior, specifically testing the Monitoring Hypothesis and the Substitution Effect within the Indonesia Stock Exchange. Design and Methodology A quantitative explanatory design was employed, analyzing 85 observations from non financial companies. Data were retrieved from the Bloomberg Terminal and annual reports. The Generalized Linear Model (GLM) with a Gaussian distribution and identity link function was utilized to examine the causal relationships between the Debt to Equity Ratio (DER), Social Scores, and the Effective Tax Rate (ETR), while controlling for governance and innovation metrics. Findings Empirical Results demonstrate that DER has a significant positive effect on ETR, confirming that leverage serves as an effective external monitoring mechanism that reduces tax aggressiveness. Conversely, Social Scores exhibit a significant negative impact on ETR, supporting the Substitution Effect. This suggests firms utilize high social performance as a reputational shield to mask tax avoidance, validating the "CSR-Tax Paradox." Internal governance variables showed no significant influence. Originality and Value This study contributes to the literature by highlighting how external market signals such as leverage and social reputation that are more dominant drivers of tax behavior than internal oversight in emerging markets, providing regulators with new indicators for identifying tax risks.
Keywords
Author Biographies
Happy Tatemba
Universitas Klabat.
Faculty of Economics and Business, Universitas Klabat, Minahasa Regency, North Sulawesi Province, Indonesia.
Prayanthi
Universitas Klabat.
Faculty of Economics and Business, Universitas Klabat, Minahasa Regency, North Sulawesi Province, Indonesia.
Article Identifiers
- Article Title: Capital Structure and Social Signaling: A Dual Mechanism Analysis of Tax Aggressiveness in Emerging Markets
- DOI: 10.59431/ijer.v6i2.764
- Publication Date: 2026-06-28
- Journal: Indonesian Journal Economic Review (IJER)
- Volume: 6
- Issue: 2
- Pages: 336–343
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Issue Information
Article Details
| Volume: | 6 |
| Issue: | 2 |
| Year: | 2026 |
| Published: | 2026-06-28 |
| Pages: | 336–343 |
| Section: | Articles |
Additional Information
How to Cite
Tatemba, H., & Prayanthi, I. (2026). Capital Structure and Social Signaling: A Dual Mechanism Analysis of Tax Aggressiveness in Emerging Markets. Indonesian Journal Economic Review (IJER), 6(2), 336–343. https://doi.org/10.59431/ijer.v6i2.764
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This work is licensed under a Creative Commons License.
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