The Impact of Corporate Tax Planning on the Financial Performance of Listed Companies in Nigeria

Abdullahi Bala Ado; Norfadzilah Rashid; Umar  Aliyu Mustapha; Saheed  Ademola Lateef

doi:10.31436/ijema.v29i2.821

Authors

Abdullahi Bala Ado Universiti Sultan Zainal Abidin, Malaysia
Norfadzilah Rashid Universiti Sultan Zainal Abidin, Malaysia
Umar Aliyu Mustapha Skyline University Nigeria, Nigeria
Lateef Saheed Ademola Universiti Sultan Zainal Abidin, Malaysia

DOI:

https://doi.org/10.31436/ijema.v29i2.821

Keywords:

Tax, Planning, Corporate, Financial performance, Firms

Abstract

Corporate tax planning represents an area of financial planning that offers companies and tax managers an opportunity to reduce tax liability and enhance company financial performance. The study attempts to examine the impact of corporate tax planning on the financial performance of listed companies on the Nigeria Stock Exchange (NSE) using the secondary method to retrieve financial data from the Thompson Reuters DataStream, and annual reports of listed companies. The study employed multiple regression as a method of analysis on 84 companies listed on the board of NSE with 756 observations for the duration of nine years from 2010-2018. The study found that the inventory intensity reveals no relationship with Return on Asset (ROA). The result implies that a percentage increase in inventory intensity of the company might not in any way increase financial performance. Also, capital intensity reveals a negative significant relationship with ROA. This outcome implies that a significant rise in capital intensity would lower financial performance. However, the study further reveals that leverage is positively and significantly related to ROA. This implies that extremely geared companies tend to increase their ROA. Agency and Tax planning theory are the main theories supporting this research. The findings suggest that firms need to employ the services of tax experts and implement more healthy tax planning strategies for higher financial performance. Finally, this study will assist relevant scholars and users of financial information in making informed decisions.

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