Examining the relationship between ownership structure, audit quality, and tax avoidance: a cross-country analysis of Indonesia and Malaysia

Corporate tax avoidance remains a central concern in emerging economies where governance systems and regulatory environments continue to evolve. This study examines the relationship between ownership structure and tax avoidance in publicly listed firms in Indonesia and Malaysia, further assessing the moderating role of audit quality. Five ownership types—family, foreign, government, institutional, and managerial—are analysed using percentage shareholdings as proxies. Audit quality is measured using Big 4 audit firm affiliation and audit report lag, reflecting auditor reputation and audit timeliness. Results reveal contrasting patterns across institutional settings: in Indonesia, family and government ownership show no significant association with tax avoidance, whereas institutional ownership increases avoidance. In Malaysia, family and institutional ownership reduce tax avoidance, suggesting that governance mechanisms encourage compliance. Managerial ownership in both countries is associated with entrenched behaviour, whereby managers may pursue tax avoidance for private benefit. Audit quality exhibits a nuanced moderating effect: greater audit delay reduces tax avoidance among family firms, while Big 4 auditors may facilitate avoidance, particularly in foreign-owned firms. These findings underscore the complex interplay between ownership characteristics and external audit oversight in shaping corporate tax behaviour. Practically, the results provide actionable insights for tax authorities, securities regulators, and audit oversight bodies. In particular, the evidence supports closer monitoring of firms with high foreign or institutional ownership, strengthening enforcement over Big 4 audit practices, and enhancing disclosure requirements for ownership concentration and audit delays to improve transparency and tax compliance. Methodologically, the study contributes by integrating audit timeliness as a proxy for audit quality. Future research should use broader datasets, refined proxies, and longer observation periods to capture evolving tax strategies within diverse institutional environments.