Comparative Study of Corporate Governance and Culture in Indonesia and Malaysia: The Effect on Tax Avoidance and Corporate Social Responsibility

Purpose: This research aims to compare corporate governance and corporate culture practices between Indonesia and Malaysia. Additionally, it seeks to analyze the impact of corporate governance and corporate culture on tax avoidance and corporate social responsibility (CSR). Design/methodology/approach: The corporate governance function was measured using an index consisting of the size of the independent board of commissioners, the intensity of board of commissioners' activities, and the audit committee. Corporate culture was assessed using indicators of gender diversity on the executive board and power distance. Data was gathered through secondary sources, focusing on manufacturing companies listed on the Indonesian Stock Exchange (IDX) and the Malaysian Stock Exchange for the period 2018-2022. Findings: The results indicated differences in corporate governance practices and organizational culture (measured by board diversity and power distance) between Indonesia and Malaysia. The study documented a reciprocal effect between tax avoidance and CSR. It found that the effectiveness of corporate governance mechanisms positively influences tax avoidance and CSR disclosure in Indonesia, while in Malaysia, the effect is negative. Corporate culture significantly affects tax avoidance behavior when measured by board gender diversity in Indonesia. In contrast, corporate culture impacts CSR disclosure in Malaysia but not in Indonesia. Furthermore, only Indonesia experienced a negative effect when corporate culture was measured in terms of power distance. Research limitations/implications: The availability of sustainable reporting in both countries are limited, CSR is measured with disclosure in annual report or sustainable report according to the availability in each company. Originality/value: This research provides a comprehensive comparative analysis of corporate governance and corporate culture practices between Indonesia and Malaysia. It contributes empirical evidence on the reciprocal effects of tax avoidance and CSR, offering insights into how corporate governance and culture influence these practices differently across countries.