Tax Planning and Firm Value: Empirical Evidence from Nigerian Consumer Goods Industrial Sector

Appolos Nwabuisi Nwaobia · Jerry Kwarbai · Grace Oyeyemi Ogundajo

39 citations0/0 files storedResearch Journal of Finance and Accounting

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Corporate Taxation and Avoidance Corporate Finance and Governance Financial Reporting and Valuation Research

Abstract

Taxes on corporate profits are mandatory and usually constitute a large outflow for firms that, if not planned, lead to disproportionate and unwilling transfer of corporate resources to the government with its negative impact on the operating capacity and firm value. In the light of this, the study examined the effect of tax planning on firm value. Ex-post facto research design was adopted. The study covered 50 firm-year observations for the period, 2010-2014. Data were drawn from the published financial statements of the sampled companies and analyzed using descriptive and inferential statistics centred on specified panel regression model. The joint effect of the considered tax planning proxies on the firm value was significant (F-stat. =2.580; P-value = 0.032). While Effective tax rate (ETR), Dividend (DIV) and Firm age (FAG) are positively and significantly related to firm value, firm size, leverage and tangibility exert negative effect on firm value. The Adj. R 2 value of 20.6% was not sufficiently strong in explaining the variation in firm value. The study concluded that wholistic approach to tax planning and optimal mix of tax planning strategies are important determinants of their effect on firm value. Keywords : Firm value, Tax planning, Political cost theory, Tangibility, leverage.

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References

1985Positive Accounting Theory 2007Are Family Firms More Tax Aggressive Than Non-Family Firms?1999The Boundaries of Financial Reporting and How to Extend Them 1996The pricing of discretionary accruals 2009Tax Reporting Aggressiveness and Its Relation to Aggressive Financial Reporting 2009Corporate Tax Avoidance and Firm Value 2009An Examination of Corporate Tax Shelter Participants 2001Research Design in Social Research

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2020Receptiveness of effective tax rate to firm characteristics: an empirical analysis on Indian listed firms 2019The corporate tax planning and financial performance of systemically important banks in Nigeria 2020Tax Planning Strategies and Profitability of Quoted Manufacturing Companies in Nigeria 2019Corporate Tax Avoidance and Firm Profitability 2019Tax Compliance and Uncompliance Entity: A Comparative Study of Investor Reaction 2020Effect of Tax Planning on Firm Value of Quoted Consumer Goods Manufacturing Firms in Nigeria

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