ILOMATAILOMATA

Ilomata International Journal of Tax and AccountingIlomata International Journal of Tax and Accounting

This study looks at the impact of Firm Size, Debt to Equity Ratio, and Tax Expense Efficiency on Return on Assets in coal subsector companies listed on the Indonesia Stock Exchange between 2017 and 2024. There are seven firms in 56 firm-year observations. “Pooled ordinary least squares (OLS) regression is used in the empirical analysis on firm-year data, and diagnostic tests are used to confirm that the calculated connections are reliable. The findings show that the regression model as a whole is statistically significant, indicating that the independent variables work together to explain changes in Return on Assets. However, partial test findings reveal that Firm Size has a positive and statistically significant impact on Return on Assets, the Debt to Equity Ratio has a negative and statistically significant association, and Tax Expense Efficiency has no statistically significant influence. These results suggest that business size and capital structure have a greater impact on profitability in the coal subsector than does tax expense efficiency. By offering sector-specific data from a capital-intensive industry, this study adds to the body of literature by emphasizing the significance of financing choices and operational scale in determining business profitability as well as the limited relevance of tax efficiency under stringent regulatory frameworks.

The study concludes that Return on Assets in coal subsector companies is influenced by Tax Expense Efficiency, Debt to Equity Ratio, and Firm Size.However, only Debt to Equity Ratio and Firm Size have a statistically significant direct impact on Return on Assets.These findings suggest that funding choices and operational scale have a greater impact on the profitability of coal subsector businesses than does the effectiveness of tax expense management.The study highlights the importance of considering the interplay of these financial factors in understanding profitability dynamics within the coal industry.

Further research should investigate the impact of corporate governance mechanisms on the relationship between capital structure and profitability in the Indonesian coal industry, as strong governance could mitigate the negative effects of high debt levels. Additionally, exploring the role of operational efficiency, beyond firm size, in driving profitability within this sector is crucial, potentially through detailed analysis of cost structures and production processes. Finally, a longitudinal study examining the effects of evolving environmental regulations and global energy transition pressures on the financial performance of coal companies is warranted, considering the increasing importance of sustainability factors in investment decisions and long-term viability.

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