Journal of Economic, Finance Research and Review (JEFRR)

The Role of Corporate Governance in Moderating the Effects of Tax Efficiency, Profitability, and Investment Opportunities on Earnings Quality

Eka Muhammad Muqorrobien, Rambe, Dedy Ahmadi, Xu, Jessica Jia

30 January 2026 · Vol. 2, Issue 1, pp. 27-38

DOI: 10.65150/EP-jefrr/V2E1/2026-04

Abstract

This research is conducted to find out the effect of Tax Retention Rate, Profitability, and Investment Opportunity Set on earnings quality and to examine the Corporate Governance variable as the moderating variable. The theoretical basis used in this research is agency theory and signaling theory. Based on those theories, good corporate governance will reduce the principal-agent conflict of interest and send a positive signal to investors through its credible financial reporting. This study employs a quantitative approach with secondary data that consists of the financial reports of LQ45 index companies listed in the Indonesian Stock Exchange (IDX) from 2020 to 2024. The data were analysed using Moderated Regression Analysis (MRA). The results indicate that Tax Retention Rate has a negative and significant effect on earnings quality. Furthermore, the moderating analysis reveals that Corporate Governance can moderate the relationship between Tax Retention Rate and earnings quality by weakening the negative impact of tax retention policies. These findings highlight that corporate governance mechanisms are more effective in controlling policies directly associated with earnings management incentives, particularly tax-related decisions.

Keywords: Tax Retention Rate, Profitability, Investment Opportunity Set, Corporate Governance, Earnings Quality.

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Eka Muhammad Muqorrobien, Rambe, Dedy Ahmadi, Xu, & Jessica Jia (2026). The Role of Corporate Governance in Moderating the Effects of Tax Efficiency, Profitability, and Investment Opportunities on Earnings Quality. Journal of Economic, Finance Research and Review, 2(1), 27-38. https://doi.org/10.65150/EP-jefrr/V2E1/2026-04

@article{Eka2026,
  title   = {The Role of Corporate Governance in Moderating the Effects of Tax Efficiency, Profitability, and Investment Opportunities on Earnings Quality},
  author  = {Eka Muhammad Muqorrobien and Rambe and Dedy Ahmadi and Xu and Jessica Jia},
  journal = {Journal of Economic, Finance Research and Review},
  year    = {2026},
  volume  = {2},
  number  = {1},
  pages   = {27-38},
  doi     = {10.65150/EP-jefrr/V2E1/2026-04},
  url     = {https://doi.org/10.65150/EP-jefrr/V2E1/2026-04}
}

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