The Relationship between Tax Planning and Earnings Management of Public Limited Company in Thailand
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Abstract
The purpose of this research article is to study a relationship between tax planning and earnings management of public limited company in Thailand. The samples comprise of 100 top public limited companies ranked by the Department of Business Development (DBD), which can be divided according to income, assets, profit, and capital. The data was collected from the financial statements during the year 2016-2018. The samples comprise of 414 samples. Independent variable is tax planning that was measured by Effective Tax Rate (ETR) and the ratio of tax to total assets (TAX/ASSET). The dependent variable is earnings management measured by discretionary accruals following Kothari et al. (2005)’s model. Data analysis applied Multiple Regression Analysis. Overall, this study found that tax planning has positive relationship with earnings management. This indicates that company uses a tax planning as policy to reduce corporate income tax expenses and earnings management to make the company’s profits higher. Moreover, the companies used service from large audit firm (BIG4) tax planning that has more impact earnings management than the companies that used service from small audit firm (NON-BIG4). This is useful for stakeholders to make a decision, and it can be used as a guideline for regulators to improve tax laws.
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