Behavior of Managerial Ownership and Government Ownership toward Tax Avoidance in Indonesia and Malaysia

Abstract This research analyzes the impact of managerial and government ownership on tax avoidance in Indonesia and Malaysia, focusing on 2,370 listed manufacturing companies from 2017 to 2021. Both countries have seen declining tax revenues due to corporate tax avoidance and evasion, sparking debates about its ethics. From an agency theory perspective, shareholders (principals) favor tax avoidance to boost after-tax profits, while managers (agents) may avoid taxes, leading to government revenue loss. In less developed countries with weak investor protection, ownership structure is crucial for ensuring managers act in shareholders’ best interests. Findings reveal a negative effect of ownership structure on tax avoidance, indicating lower tax avoidance intensity among managers in both countries. In Indonesia, managerial ownership strongly reduces tax avoidance, while in Malaysia, government ownership has a similar effect. No significant difference was found between the countries’ ownership structures. This research contributes by mapping ownership structures of listed manufacturing companies in both countries and providing empirical evidence on managerial and government ownership behaviors toward tax avoidance. The results can guide policymakers in Indonesia and Malaysia in designing effective corporate governance policies and tax regulations.