Tax Planning, Gender Diversity, Earning Power, and Institutional Ownership on Earning Management

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FORMOSA NEWS - Jakarta - Mining Companies’ Financial Reporting Practices Driven by Tax Planning and Institutional Ownership, Study Shows. Corporate tax planning, earning power, and institutional ownership significantly influence earnings management practices among Indonesian mining companies, according to a recent study conducted by researchers Cici Nurdianti, Hesti Setiorini, and Nensi Yuniarti. Zs from Universitas Muhammadiyah Bengkulu. Published in 2026 in the Journal of Finance and Business Digital, the five-year empirical study analyzed corporate annual reports from 2020 through 2024 to determine how financial attributes shape profit manipulation strategies in the extractive sector. The findings provide vital insights for investors, regulators, and financial analysts seeking to evaluate report transparency amidst high global commodity price volatility.

Market Volatility and the Urgency of Financial Transparency
Between 2020 and 2024, global commodity markets experienced extreme price swings due to geopolitical tensions and post-pandemic economic shifts. Coal and nickel prices soared to record highs before falling sharply. For example, the benchmark coal price peaked at $330 per ton in October 2022 before dropping to $117 per ton in December 2023. This dramatic shift directly reduced the net profit of major industry actors like PT Bukit Asam Tbk by 51 percent in 2023. Fluctuations in revenue create strong incentives for corporate executives to engage in earnings management using accounting discretion to smooth reported income and maintain market confidence. Under agency theory, information asymmetry between corporate insiders and external investors enables managers to alter financial statements for personal or strategic goals. Understanding the underlying drivers of these accounting choices is essential to protecting investor interests and maintaining financial market integrity.

Simplified Research Methodology
To examine these corporate behaviors, the research team from Universitas Muhammadiyah Bengkulu utilized a quantitative research design based on secondary financial data.

• Population and Sample: The study examined Indonesia's mining sector, which comprised 63 publicly listed companies on the Indonesia Stock Exchange.
  
• Sampling Technique: Using a purposive sampling method with strict selection criteria, the researchers selected 36 corporations.
  
• Observation Period: With data gathered across a five-year period (2020–2024), the final dataset comprised 180 total firm-year observations.
  
• Data Sources: Data were extracted directly from official corporate annual reports and audited financial statements published on the Indonesia Stock Exchange platform.
  
• Analytical Approach: The team applied multiple linear regression using SPSS version 26, testing classical assumptions including normality, multicollinearity, heteroscedasticity, and autocorrelation before conducting hypothesis tests.
  

Key Findings: Core Drivers of Earnings Management

Statistical evaluation revealed that three of the four tested attributes exert a statistically significant influence on earnings management practices:

• Tax Planning Increases Earnings Management: Legal strategies to minimize corporate tax liabilities strongly align with profit manipulation. Executives utilize accounting discretion in tax strategies to stabilize cash flows and artificially enhance net income.
  
• Earning Power Drives Income Smoothing: Companies with strong profitability show a higher tendency to engage in earnings management. High profit margins allow managers to build financial buffers during boom cycles to cushion against future price drops.
  
• Institutional Ownership Exerts Directional Influence: Large institutional shareholders actively monitor corporate decisions, encouraging managers to manage earnings strategically to meet long-term institutional targets and mitigate risk.
  
• Gender Diversity Shows No Impact: Boardroom gender diversity does not significantly affect earnings management. The presence of female directors on boards of commissioners or directors has not reached the critical mass needed to alter accounting practices.
  

Real-World Impact and Industry Implications
The study offers practical guidance for capital market regulators, institutional investors, and corporate governance committees. Regulatory bodies such as the Financial Services Authority (OJK) can use these insights to refine disclosure guidelines around corporate tax planning and profit reporting in cyclical industries. Furthermore, the finding regarding board gender diversity suggests that simply adding female representation to corporate boards does not automatically guarantee stronger oversight if tokenism persists. For investors and financial analysts, the research highlights the necessity of scrutinizing tax planning notes and institutional blockholding dynamics when evaluating the true financial health of mining emiten.

Author Profiles
Cici Nurdianti, S.E., M.Ak. is a lead researcher and faculty member in the Department of Accounting at Universitas Muhammadiyah Bengkulu, specializing in corporate financial reporting, tax planning, and earnings management.
Hesti Setiorini, S.E., M.Si. is an academic and researcher at Universitas Muhammadiyah Bengkulu whose work focuses on corporate finance, accounting policy, and corporate governance mechanisms.
Nensi Yuniarti. Zs, S.E., M.Si. is an accounting scholar at Universitas Muhammadiyah Bengkulu with research expertise in financial accounting, capital markets, and institutional ownership structures.

Source
Cici Nurdianti, Hesti Setiorini, and Nensi Yuniarti. Zs. Tax Planning, Gender Diversity, Earning Power, and Institutional Ownership on Earning Management. Journal of Finance and Business Digital (JFBD), Vol. 5, No. 2, 2026, pp. 251–268.
DOI : https://doi.org/10.55927/jfbd.v5i2.26
URL: https://journaljfbd.my.id/index.php/jfbd