CHAPTER III

RESEARCH METHODOLOGY

3.1 Research Design

The method use in this research is quantitative descriptive research method.
Quantitative descriptive method is the analysis method that collects, classifies,
analyzes and presents data objectively. This research is done to know the impact of
Book-Tax difference on Profit Growth in consumption industry companies that are
registered in Indonesia Stock Exchange for the period 2014-2016.

3.2 Population and Sample

3.2.1 Population
According to Sugiyono (2015, p.115), “populasi adalah wilayah generalisasi
yang terdiri atas: obyek/subyek yang mempunyai kualitas dan karakteristik tertentu
yang ditetapkan oleh peneliti untuk dipelajari dan kemudian ditarik kesimpulannya”.
It can be explained that population is a generalization area that consists of
object/subject that have certain quality and characteristic that is determined by
researchers to be studied and given the conclusion.
Population that will be used as the observation in this research is the consumption
industry companies that are registered in Indonesia Stock Exchange for year 2014-2016
with the total of 36 companies. Consumption industry companies are chosen because
these companies’ shares are actively traded in the stock market so that the stock price
also moves actively. Other than that, consumption industry companies also have strong
business competition resulting from the high trading activity. This research uses
financial statement for the last three years from 2014-2016 which is the latest data that
can provide a picture of the company's financial performance.

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3.2.2 Sample
According to Sugiyono (2015, p.116), “Sampel adalah bagian dari jumlah dan
karakteristik yang dimiliki oleh populasi tersebut.” It can be explained that sample is
part of the amount and characteristic owned by population. Sample selection in this
research is by using purposive sampling method. According to Sugiyono (2015, p.122),
“purposive sampling adalah teknik penentuan sampel dengan menggunakan kriteria
atau pertimbangan tertentu”. It can be explained that purposive sampling is sample
selection technique by using certain criteria and consideration.
The criteria that is used to select the sample are as follows:
1. Consumption industry companies registered in Indonesia Stock Exchange in period
2014-2016.
2. Consumption industry companies that publish complete financial statement in year
2014-2016.
3. Consumption industry companies that does not suffer losses in the financial
statement for year 2014-2016.
Table 3.1 Determination of Sample
No Description Amount
Consumption industry companies registered in Indonesia Stock
1. 36
Exchange in period 2014-2016
Consumption industry companies that do not publish complete
2. (3)
financial statement in year 2014-2016
Consumption industry companies that do not suffer losses in
3. (8)
financial statement for year 2014-2016
Amount of companies chosen as research sample 25
Source : Indonesia Stock Exchange (2018)
As a result, the companies that are used as the sample is 25 companies, therefore the
amount of research data for period 2014-2016 are 75 samples.

3.3 Data Collection Method

The data used in this research is secondary data that refers to information
collected from existing resource. Data collection method in this research is by
conducting documentation which is done by collecting and studying the documents that
are related and relevant to this research either through literature or search through the
internet to obtain the necessary information and data. The related data is in the form of
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financial statement of consumption industry companies that has been audited for year
2014-2016 published in Indonesia Stock Exchange through website www.idx.co.id.

3.4 Operational Variable Definition and Variable Measurement

3.4.1 Dependent Variable (Y)
According to Hasan (2016, p.227) “Variabel terikat adalah variable yang nilai-
nilainya bergantung pada variable lainnya, biasanya disimbolkan dengan Y“. It can
be explained that dependent variable is a variable whose values depend on other
variables, usually denoted by Y. The dependent variable in this research is Profit
Growth. Profit Growth is profit generated by company from period to period and can
be used as the basis by stakeholder in decision making. The profit growth is measured
jwith formula as follows:
Description:
∆NI : Profit Growth
NIit : Profit of company in current year
NIi(t-1) : Profit of company in previous year

𝑁𝐼𝑖𝑡 − 𝑁𝐼𝑖(𝑡−1)
∆𝑁𝐼 =
𝑁𝐼𝑖(𝑡−1)

3.4.2 Independent Variable (X)

According to Hasan (2016, p.227) “Variabel bebas adalah variable yang nilai-
nilainya tidak bergantung pada variable lainnya, biasanya disimbolkan dengan X“. It
can be explained that the independent variable is a variable whose values are
independent of other variables, usually symbolized by X". The independent variables
in this research consist of:

3.4.2.1 Permanent Difference (X1)

Permanent difference is difference between commercial financial statement and
fiscal financial statement is related with recognition principle of revenue and expense
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but it isn’t related with period. The permanent difference is measured with formula as
follows:
𝑇𝑜𝑡𝑎𝑙 𝑃𝑒𝑟𝑚𝑎𝑛𝑒𝑛𝑡 𝐷𝑖𝑓𝑓𝑒𝑟𝑒𝑛𝑐𝑒
𝑃𝑒𝑟𝑚𝑎𝑛𝑒𝑛𝑡 𝐷𝑖𝑓𝑓𝑒𝑟𝑒𝑛𝑐𝑒 𝑅𝑎𝑡𝑖𝑜 =
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡

3.4.2.2 Temporary Difference (X2)

Temporary difference is the difference of amount presented in commercial
financial statement with fiscal financial statement that can be occurred because of
timing difference of revenue and expense recognition. The temporary difference is
measured with formula as follows:
𝑇𝑜𝑡𝑎𝑙 𝑇𝑒𝑚𝑝𝑜𝑟𝑎𝑟𝑦 𝐷𝑖𝑓𝑓𝑒𝑟𝑒𝑛𝑐𝑒
𝑇𝑒𝑚𝑝𝑜𝑟𝑎𝑟𝑦 𝐷𝑖𝑓𝑓𝑒𝑟𝑒𝑛𝑐𝑒 𝑅𝑎𝑡𝑖𝑜 =
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡

Definition of operational variable in this research can be seen as follows:

Table 3.2 Definition of Operational and Measurement of Variable
Variable Definition Indicator Measurement Scale
Profit generated by
company from period 𝑁𝐼𝑖𝑡 − 𝑁𝐼𝑖(𝑡−1)
Profit
to period and can be 𝑃𝐺 =
Growth 𝑁𝐼𝑖(𝑡−1) Ratio
used as the basis by
(Y)
stakeholder in decision
making
Difference between
commercial financial
statement and fiscal
Permanent 𝑇𝑜𝑡𝑎𝑙 𝑃𝑒𝑟𝑚𝑎𝑛𝑒𝑛𝑡 𝐷𝑖𝑓𝑓𝑒𝑟𝑒𝑛𝑐𝑒
financial statement is 𝑃𝐷𝑅 =
Difference 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡 Ratio
related with recognition
(X1)
principle of revenue
and expense but it isn’t
related with period.
Difference of amount
presented in
commercial financial
statement with fiscal
Temporary
financial statement that 𝑇𝑜𝑡𝑎𝑙 𝑇𝑒𝑚𝑝𝑜𝑟𝑎𝑟𝑦 𝐷𝑖𝑓𝑓𝑒𝑟𝑒𝑛𝑐𝑒
Difference 𝑇𝐷𝑅 = Ratio
can be occurred 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡
(X2)
because of timing
difference of revenue
and expense
recognition.
Source : Prepared by Writer (2018)
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3.5 Data Analysis Method

The data that has been collected is proceed with SPSS version 25. In this study
the method of analysis used is regression analysis method. Regression analysis is an
analysis used to find out how independent and dependent variables are related to
functional or cause effect relationships. (Agus Tri Basuki, Nano Prawoto, 2016) This
study was tested by several statistical tests consisting of descriptive statistical analysis,
classical assumption test and hypothesis test.
3.5.1 Descriptive Statistic
Descriptive statistics is conducted to get a description of research variables. It
is part of the statistics that study how to collect and present data so that it can be easily
understood. Descriptive statistic is concerned with collecting, summarizing data and
the presentation of the summary results. The data should be well summarized and
organized in the form of useful tables or presentations as a basis in the decision making
process. Two important measurements often used in decision-making are the central
tendencies such as mean, median and mode and the size of dispersion such as standard
deviation and variance.
3.5.2 Classic Assumption Test
The classical assumption test is a prerequisite test before performing multiple
regression tests. The classical assumption test is done to find out whether the regression
model obtained can produce a BLUE (Best Linear Unbiased Estimator) linear estimator.
The classic assumption tests that are carried out are as follows:
3.5.2.1 Normality Test
The normality test aims to test whether in the regression model disturber or
residual (independent and dependent) variable has a normal distribution or not. A good
regression model is the data that is normally distributed or close to normal. The t and
F test assume that the residual values follow the normal distribution, if this assumption
is violated, the static test will become invalid for the small number of samples. There
are two ways to detect whether the residual is normally distributed or not that is with
graphic analysis and statistic tests. (Ghozali, 2016).
a. Graphic Analysis
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One of the ways to look at normality of residual is to look at the histogram

graph comparing observation data with a distribution whether it is closer to the normal
distribution or not. A more reliable method is to look at a normal probability plot then
compare it with the cumulative distribution of the normal distribution. Normal
distribution will form a straight diagonal line and the plotting data will be compared
with the diagonal line. If the data distribution is normal, then the line representing the
real data will follow the diagonal line. (Ghozali, 2016)
b. Statistic Analysis
Normality test with statistics can be done by testing the residual normality
through Kolmogorov-Smirnov non-parametric statistical test (K-S). (Ghozali, 2016).
The K-S test is done by hypothesis as follows:
i. H0 is accepted if significant value > 5%. It means that the residual data is
normally distributed.
ii. HA is accepted if significant value < 5%. It means that residual data is not
normally distributed.

3.5.2.2 Multicollinearity Test

Multicollinearity test aims to test whether there is a correlation between the
independent variables in regression model. A good regression model should not have
any correlated among the independent variables. Multicollinearity can be seen from the
tolerance value or Variance Inflation Factor (VIF) value. These two measures show
which of the independent variables are described by other independent variables.
Common cutoff values used to indicate the presence of multicollinearity are tolerance
values≤ 0.10 or VIF value ≥ 10. If the tolerance value is ≥ 0.10 or VIF value ≤ 10, it
means that there is no multicollinearity among the variables in the regression model. If
there is a presence of multicollinearity, every coefficients of regression from the
independent variable become unmeasured and the standard value error will become
infinite. (Ghozali, 2016)
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3.5.2.3 Autocorrelation Test

The autocorrelation test aims to test whether there is a correlation between the
disturber error in period t with the disturber error in period t-1 (previous) in the linear
regression model. If correlation occurs, then there is an autocorrelation problem. A
good regression model is a regression that is free of autocorrelation. Autocorrelation
arises because of the consecutive observations overtime that are related to each other.
This problem arises because the residual is not free from one observation to another.
Detection method of autocorrelation is done by Durbin-Watson test (DW test).
(Ghozali, 2016). The decision-making guidance on whether there is an autocorrelation
is as follows:
a. If 0 < d < dl, it means that there is positive autocorrelation, therefore the null
hypothesis is rejected.
b. If dl ≤ d ≤ du, the result cannot be concluded because it is in the area that is not
convincing (inconclusive).
c. If 4 – dl < d < 4, it means that there is no negative autocorrelation, therefore the
null hypothesis is rejected.
d. If 4 – du ≤ d ≤ 4 - dl, the result cannot be concluded because it is in the area that is
not convincing (inconclusive).
e. If du < d < 4 - du, it means that there is no positive or negative autocorrelation,
therefore the null hypothesis accepted.

3.5.2.4 Heteroscedasticity Test

Heteroscedasticity test aims to test whether there is a variance inequality of the
residual from one observation to another observation in the regression model. If the
variance of the residual from one observation to another observation is fixed, then it is
called homoscedasticity and if it is different, it is called heteroscedasticity. A good
regression model is homoscedasticity or non heteroscedasticity. There are several ways
to detect whether heteroscedasticity occurs, which is by:
a. Scatter Plots Test
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Looking at the plot graph between the predicted value of the dependent variable
(ZPRED) with the residual (SRESID). To detect the occurrences of heteroscedasticity,
can be done by looking whether there is a presence of a particular pattern on scatter
plot graph between SRESID and ZPRED where the Y axis is the predicted Y and Z
axis is residuals (predicted Y – actual Y) that have been studentized. The basis of the
analysis is if there is a certain pattern such as the existing dots form a certain pattern
that is regular (wavy, widened or narrowed), then it indicates that there has been
heteroscedasticity. If there is no clear pattern in the graphic and the dots spread out
above and below the number 0 on the Y axis, it means there is no heteroscedasticity.
b. Glejser Test
Glejser Test is done by regressing the residual absolute values against independent
variables with regression equations: | Ut | = α + βXt + vt. If independent variables have
statistically significant effect on the dependent variable, then there is an indication of
heteroscedasticity. This can be seen from the probability of significance above
confidence level in 5%. (Ghozali, 2016)

3.5.3 Multiple Linear Regression Analysis

Besides measuring the strength of the relationship between two or more
variables, regression analysis also shows the direction of the relationship between the
dependent variable with the independent variable. In this study, the multiple linear
regression equation used is as follows:
Y = a + b1X1 + b2X2 + e
Where:
Y = Profit Growth
a = Constanta
X1 = Permanent Difference
X2 = Temporary Difference
b1, b2 = Coefficient regression variable X1, X2
e = Error of term
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3.5.4 Hypothesis Analysis

3.5.4.1 Simultaneous F Test
F statistic test shows whether the independent variables included in model have
simultaneous impact on dependent variable. (Ghozali, 2016).
Hypothesis Formulation:
a. Null hypothesis (H0) to be tested is whether all parameter in model are same with
zero or H0: b1 = b2 =..... = bk = 0. It means that all independent variables is not
significant explain the dependent variable.
b. Alternative hypothesis (HA) is whether not all parameter in model are
simultaneously same with zero or HA: b1 ≠ b2 ≠.....≠ bk ≠ 0. It means that all
independent variable simultaneously significant explain the dependent variable.
In this research, the value of 𝐹𝑐𝑜𝑢𝑛𝑡 will be compared with 𝐹𝑡𝑎𝑏𝑙𝑒 in significant
level (α) = 5%. The criteria of hypothesis valuation in F test are as follows:
a. H0 is accepted if 𝐹𝑐𝑜𝑢𝑛𝑡 ≤ 𝐹𝑡𝑎𝑏𝑙𝑒 or α > 0.05
b. HA is accepted if 𝐹𝑐𝑜𝑢𝑛𝑡 ≥ 𝐹𝑡𝑎𝑏𝑙𝑒 or α < 0.05

3.5.4.2 Partial T test

T statistic test basically indicates how far the influence of an independent
variable individually (partially) in explaining the dependent variable by assuming other
variables is constant. (Ghozali, 2016).
Hypothesis Formulation:
a. The null hypothesis (H0) to be tested is whether a parameter (bi) is equal to zero
or H0: bi = 0. It means that an independent variable is not significantly
explaining the dependent variable.
b. Alternative hypothesis (HA) is whether parameter of a variable is not equal to
zero, or HA: bi ≠ 0. This means that the independent variable significantly
explain the dependent variable.
In this research, tcount will be compared with ttable at significant level (α) = 5%.
The decision making criteria in this t-test are:
a. H0 received if -ttabel ≤ tcount ≤ ttable or α > 0.05
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b. HA accepted if tcount > ttable or α < 0.05

3.4.3.3 R2 Test (Coefficient of Determination)

The coefficient of determination (R2) is use to measure how far the ability of
the model in explaining the variation of the dependent variable. The value of the
coefficient of determination is between zero and one. The small value of R2 means the
ability of the independent variables to explain the variation of the dependent variable
is very limited. A value close to one means the independent variables provide almost
all the information required to predict the variation of the dependent variable. (Ghozali,
2016).