THE EFFECT OF DIVERSIFICATION STRATEGY ON TAX AGGRESSIVENESS WITH BOARD DIRECTOR’S INCENTIVE AS THE MODERATING VARIABLE

Abstract

This study aims to evaluate the effect of diversification strategy on tax aggressiveness, with board director's incentive as the moderating variable. Utilizing secondary data obtained from the annual reports of manufacturing companies listed on the Indonesia Stock Exchange (IDX) during the period 2019–2023, this research measures diversification strategy using the Herfindahl Index (HERF) and tax aggressiveness using the Effective Tax Rate (ETR) as a proxy. Board director's incentive are calculated based on the natural logarithm of total remuneration. The data were analyzed using the Moderated Regression Analysis (MRA) method. The findings indicate that diversification strategy has a significant negative effect on tax aggressiveness, and board director's incentive strengthen this negative relationship. These results highlight the importance of effective diversification management and appropriate incentive schemes in controlling corporate tax aggressiveness.