FIRMS’ RESPONS ON TAX REFORM: EVIDENCE FROM INDONESIAN CAPITAL MARKET

Abstract

The purpose of this study was examine and analyze indications of earnings management undertaken by property and real estate companies before and after implementation of new tax law. It also examine and analyze the influence of taxes and non-tax factor on earnings management. The author uses window period two years before and two years after implementation of new tax law. Population of this research is property and real estate companies listed on Indonesia Stock Exchange. Thirty two companies are taken as sample. The result of Paired Sample T-Test shows that the discretionary accrual before and after implementation of new tax law statistically different. This implies that property and real estate companies are indicated take earnings management. In additional, panel data regression test results shows that earnings management are influenced by tax and non-tax factors. This result gives support for positive accounting theory that political cost affected motivation of earnings management.