INSTITUTIONAL OWNERSHIP AND FINANCIAL PERFORMANCE ON TAX AVOIDANCE IN INDONESIAN BASIC MATERIALS COMPANIES

Abstract

This study aims to examine the effect of profitability, liquidity, leverage, and institutional ownership on tax avoidance in basic materials sector companies listed on the Indonesia Stock Exchange during the 2020–2024 period. Tax avoidance is measured using the Cash Effective Tax Rate (CETR), while profitability is measured by Return on Assets (ROA), liquidity by Current Ratio (CR), leverage by Debt to Asset Ratio (DAR), and institutional ownership by the proportion of institutional shareholding. This research employs a quantitative approach with an associative research design. The sampling technique used is purposive sampling, resulting in 65 observations that meet the research criteria. The data analysis method applied is multiple linear regression analysis, supported by classical assumption tests including normality, multicollinearity, autocorrelation, and heteroscedasticity tests. The results show that profitability has a negative and significant effect on tax avoidance, liquidity has a positive and significant effect on tax avoidance, leverage has no significant effect on tax avoidance, and institutional ownership has a negative and significant effect on tax avoidance. Simultaneously, all independent variables significantly affect tax avoidance. These findings indicate that financial performance and corporate governance play important roles in determining corporate tax behavior and provide useful insights for improving tax compliance and strengthening corporate governance practices.