HOW DO TAX AVOIDANCE AND PROFITABILITY INFLUENCE A FIRM'S INTRINSIC VALUE?

Abstract

How Do Tax Avoidance and Profitability Influence a Firm’s Intrinsic Value? Main Purpose – The research examined how tax avoidance and profitabi­lity affect the firm’s intrinsic value. Method – This study used multiple linear regression methods. The sample was manufacturing companies during the 2016-2020 period. Main Findings - The profitability of companies that showed an increase in profits was generally viewed by principals as being able to expand invest­ment expansion, thereby increasing intrinsic value. In addition, dividends were not the primary choice in investing because investors prefer shortterm transactions. For companies experiencing problems, lowering the tax rate was even more critical. Theory and Practical Implications – This research demonstrates the relevance of agency theory in determining a company’s intrinsic value. O­n the practical aspect, the firms’ intrinsic value must be managed by ma­ nagement because it is a factor that investors pay attention to, so compa­nies need to manage their resources, assets, or capital to generate profits. Novelty - This research adds tax avoidance to seek explanations for tax planning efforts and their impact.