Afifah Nur Kamilah, Paulina Sutrisno

CORPORATE INVESTMENT AND TAX PLANNING DECISIONS: A MARKET EVALUATION

Introduction

Corporate investment and tax planning decisions: a market evaluation. Explore corporate investment, tax planning, and firm characteristics' impact on firm value. This study analyzes market evaluations on the Indonesia Stock Exchange (2019-2022) to guide investor decisions.

Abstract

This study aims to provide empirical evidence on the impact of firm characteristics, such as capital structure, size, profitability, and tax planning, on firm value. It also examines how investment decisions impact the relationship between these characteristics and firm value. Utilizing a sample of consumer cyclical and non-cyclical firms on the Indonesia Stock Exchange from 2019 to 2022, the research offers insights into company conditions and market evaluations amid high uncertainty, particularly during the COVID-19 pandemic. The combination of the two types of industrial sectors in this study will have a more comprehensive impact on the test results. Results indicate that capital structure and profitability positively influence firm value, while firm size and tax planning do not have a significant effect. Moreover, the study reveals that investment decisions shape the relationship between capital structure, firm size, profitability, and firm value. When making assessments, the market evaluates the quality of a firm's funding structure, profit-generating capability, investment decisions, and firm characteristics. This research holds implications for investors, aiding them in making informed investment choices that consider capital structure and profitability, along with strategic investment approaches by management to achieve optimal performance.

Review

This study addresses a highly pertinent area of corporate finance, investigating the interplay between firm characteristics, investment decisions, and firm value within the dynamic context of the Indonesian market during the 2019-2022 period, marked by significant global uncertainty. The research is commendable for its dual focus: not only assessing the direct impact of factors like capital structure, size, profitability, and tax planning on firm value, but also critically examining the moderating role of investment decisions in these relationships. The inclusion of both consumer cyclical and non-cyclical firms from the Indonesia Stock Exchange is a strong methodological choice, promising a more robust and comprehensive understanding of diverse market conditions and firm responses to external shocks like the COVID-19 pandemic. The findings offer valuable insights, indicating that capital structure and profitability are significant positive drivers of firm value, a conclusion aligning with established financial theories. Interestingly, firm size and tax planning were found not to exert a significant influence on firm value in this specific context, which warrants further consideration and discussion within the paper given the prominence of tax planning in the title. A particularly notable contribution is the revelation that investment decisions actively shape the relationships between capital structure, firm size, profitability, and firm value, underscoring the market's comprehensive evaluation of a firm's financial health, strategic choices, and operational effectiveness. These results provide practical implications for both investors seeking to make informed decisions and management aiming to optimize performance through strategic investment. While the study provides a solid foundation, several areas could enhance its contribution. The abstract mentions "tax planning" in the title and aims but concludes it has no significant effect; further elaboration on the specific tax planning proxies used and potential reasons for this non-significance would be beneficial. Similarly, a clearer definition or measurement of "investment decisions" would strengthen the analysis of its moderating role, as its broad nature could mask specific mechanisms. Future research could benefit from extending the analysis beyond the pandemic period to observe long-term trends, exploring specific types of investments (e.g., R&D, CAPEX) and their differential impacts, or employing alternative valuation models. Expanding the geographic scope or comparing results with other emerging markets could also provide broader generalizability and comparative insights.

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