Ownership structure and corporate tax planning: The role of family CEO duality, evidence from Indonesian manufacturing firms

Abstract

This study aims to analyze the role of Family-CEO duality in the influence of ownership structure on tax planning of manufacturing companies from 2014 to 2019. Based on 427 firm-year observations through purposive sampling and adopting research variable measurements, except for tax planning measurements such as institutional ownership, foreign ownership, and concentrated ownership, this study finds that the impact of institutional ownership and foreign ownership on tax planning differs between companies with Family-CEO duality (FCD) and those without (NFCD). Institutional ownership increases ETRP, while foreign ownership decreases ETRP in NFCD companies, but this effect does not occur in FCD companies. Meanwhile, concentrated ownership is unable to increase ETRP in all companies. These findings indicate that CEO independence weakens the aggressive influence of institutional and foreign owners in shaping tax planning strategies. In practice, these results contribute to stakeholders concerned about corporate tax procedures and burdens, emphasizing the importance of CEO independence as an agent responsible for managing the company. Developing the Effective Tax Rate (ETR) measurement, commonly used as an indicator, by adding tax penalty costs (to become ETRP), can be an alternative in tax planning analysis because tax penalty costs result from weak tax planning.