The Influence of Leverage and Tax Avoidance on the Profitability of Food and Beverage Sector Companies Listed on the Indonesia Stock Exchange for the 2020–2024 Period

Abstract

Capital structure and tax-related financial decisions may be associated with corporate performance, but their interpretation depends on how the variables are measured. This study examines the association of leverage, measured by the Debt-to-Equity Ratio (DER), and the Effective Tax Rate (ETR) with Return on Assets (ROA) among food and beverage companies listed on the Indonesia Stock Exchange during 2020–2024. ETR is used as a financial-statement proxy: lower ETR indicates a lower tax burden relative to pre-tax profit and is conventionally interpreted as consistent with greater tax avoidance. The study uses audited annual financial statements and a purposive sample of 20 firms, yielding 100 firm-year observations. The analysis applies descriptive statistics, panel-model selection, conventional Common Effect Model regression, diagnostic tests, t-tests, an F-test, and adjusted R-squared. In the conventional CEM output, DER has a positive coefficient of 0.026519 (p = 0.0433), while ETR has a negative coefficient of -0.088689 (p = 0.0240). These coefficients should be interpreted as associations with ROA: higher DER is associated with higher ROA in the sample, and lower ETR is associated with higher ROA. Because lower ETR represents greater tax avoidance under the stated proxy, the negative ETR coefficient must not be described as direct evidence that tax avoidance reduces profitability. The adjusted R-squared is 0.059357, so the model explains a limited proportion of the variation in ROA. The reported significance is conditional on conventional, non-clustered CEM inference; firm-clustered or other panel-robust standard errors were not re-estimated because the underlying firm-year dataset was not retained in the manuscript file. The findings are therefore associational and should be interpreted cautiously.