CORPORATE TAX PLANNING AND FINANCIAL PERFORMANCE OF LISTED DEPOSIT MONEY BANKS IN NIGERIA

GEORGE ECHE, JOHN TORO GIMBA, HARRISON SUNDAY VINCENT

Abstract


Corporate tax planning reflects the significant approach of the firm with the responsibility to pay less appropriate tax to the government. However, the study examines the effect of corporate tax planning on financial performance of listed deposit money banks in Nigeria. Proxies to measure corporate tax planning are debt tax shield and income effective tax, while the financial performance was proxied by Tobin’s Q. The study concentrated on the period from 2010 to 2019. Panel data was sourced from the individual financial reports of the listed deposit money banks in Nigeria. The sample adopted twelve (12) listed deposit money banks in Nigeria. The study employed ordinary least square regression model to estimate the key relationship between corporate tax planning and Tobin Q. The result shows that debt tax shield has a significant effect on Tobin Q, while income effective tax had insignificant effect on Tobin Q. The study recommends the government should engage in tax reforms whereby the income tax rate is to be adjusted from 24% to 20%. Also, banks should engage in debt financing in order to reduce the tax liability due to the fact that the interest paid on a debt is an allowable expense which reduces the chargeable profit.

Keywords


Corporate Tax Planning, Debt Tax Shield, Income Effective Tax, Firm Size, TobinQ, Listed Deposit Money Banks

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References


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