Title: INVESTIGATING THE EFFECT OF TAX PLANNING ON THE FINANCIAL PERFORMANCE OF LISTED MANUFACTURING FIRMS IN NIGERIA
Authors:
Niyi Solomon AWOTOMILUSI, Adebimpe Funmilayo ALUKO and Muideen Adeseye AWODIRAN
Abstract:
The implication of tax liability on the financial success of the taxpaying firms is enormous; therefore, organizations adopt tax planning strategies targeted at alleviating the heavy burden of tax liability. This research work empirically examined the effect of Tax Planning on the Financial Performance of Listed Manufacturing firms in Nigeria. Specifically, the study investigated the effect of effective tax rate, thin capitalization, capital intensity and lease options on the financial performance of listed manufacturing firms in Nigeria. An ex-post facto research design was adopted for the study. The population of the Study comprised 44 listed manufacturing industries quoted on the Nigeria Exchange Group as of 31st December 2022 out of which 15 companies were purposefully selected based on data availability. Data were collected from the audited annual reports of the sampled companies for a period of 10 years (2013 – 2022). Descriptive and inferential statistics (panel regression) were used to test the research hypotheses. The result revealed that effective tax rate and capital intensity indicated a significant effect on return on asset while thin capitalization and lease options had an insignificant effect on return on asset. Findings also revealed that the lease option has a significant effect on market value per share while effective tax rate, thin capitalization and capital intensity have insignificant effects on market value per share. The Study concluded that tax planning strategies have positive effects on the financial performance of Listed Manufacturing Firms in Nigeria and recommends that appropriate measures and skills should be applied in determining the mix of strategies to adopt for tax planning purposes to save the company’s financial resources.
Keywords: Financial performance, tax planning, effective tax rate, thin capitalization, capital intensity, lease option, liquidity.
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