Valley International Journal Digital Library

VIJ Digital library
Articles

Corporate Tax Saving Strategy and Share Price Performance

PDF
  • Monday Olade, IZEVBEKHAI ,
  • WASEELA Oshone MOMODU
Monday Olade, IZEVBEKHAI
(PhD, ACIT) Accountancy Department, Auchi Polytechnic, Auchi
WASEELA Oshone MOMODU
(M.Sc, CPA, ACIT) Accountancy Department, Auchi Polytechnic, Auchi
Published in : International Journal of Scientific Research and Management (IJSRM) , Vol. 11 No. 11 (2023)

Submission to VIJ 2023-11-19

Keywords

  • Debt Tax Shield, Non-Debt Tax Shied, Effect Tax Rate, Share Price

Copyright (c) 2023 Monday Olade, IZEVBEKHAI , WASEELA Oshone MOMODU

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

Abstract

This study ascertained how corporate tax saving strategy affect share price performance. It examined how debt tax shield, non-debt tax shield, and effective tax rate affect share price performance. The secondary source of data collection was adopted in the study where the purposive sampling technique was used to select a sample size of twelve (12) listed industrial goods firms in Nigeria. Ordinary Least Square regression analysis was used in this study and the findings revealed that non-debt tax shield has significant effect on share price performance of listed industrial goods firms in Nigeria and that effective tax rate has significant effect on share price performance of listed industrial goods firms in Nigeria. The study concluded that crucial component of fiscal policy that has a great impact on both the social and economic development of a nation, hence, tax savings demands attention from managers at all levels of management. The study recommended that Nigerian government needs subsidize cost of debt-financing for the companies operating in the country’s capital market and that stakeholders should develop the financial markets and make it accessible for firms to obtain long-term financing for economic growth and development.

PDF

References

  1. Adebisi, J. F. & Gbegi, O. (2013). Effect of multiple taxation on the performance of small and medium scale business enterprises (A study of West African Ceremics Ajeokuta, Kogi State). Mediterranean Journal of Social Sciences, 4(6), 323–334
  2. Ajao, M. G. & Wemambu, M.U. (2019).volatility estimation and stock price prediction in the Nigerian stock market. International Journal of Financial Research, 3(3), 45 – 58.
  3. Albadainah, J. M. (2018). The impact of tax planning on the performance level of jordanian public joint stock industrial companies measured by the balanced scorecard (BSC). European Journal of Scientific Research, 149(2), 153-164.
  4. Dada S. O. & Adetola K. (2017). Tax planning and firms’ performance in Nigeria. International Journal of Advanced Research, 5(5), 1950-1956.
  5. Eneisik, G. E. & Moses, K. U. (2021). Tax planning strategies and financial performance of quoted banks in Nigeria. Journal of Accounting and Financial Management, 7(5), 60 – 79.
  6. Enni, S. (2019). Can effective tax rates mediate the effect of profitability and debts on income smoothing? Problems and Perspectives in Management, 17(3), 89-100.
  7. Fagbemi, T. O., Olaniyi, T. A., & Ogundipe, A. A. (2019). The corporate tax planning and financial performance of systemically important banks in Nigeria. Ekonomski Horizonti, 21(1), 15-28.
  8. Hart, L. (2018). Issues and challenges with the Nigerian taxation system. Journal of Accounting, 5(3), 51 – 73.
  9. Heitzman, S. & Ogneva, M. (2016). Corporate tax planning and stock returns. California: University of Southern California Publication.
  10. Huesecken, B., Overesch, M., & Tassius, A. (2017). Effects of disclosing tax avoidance: capital market reaction to LuxLeaks Retrieved from http://ssrn.com/abstract=2848757v.pdf On 27th January, 2018. Igbinovia, Ekwueme /SIJDEB, 2(3), 2018, 255-268 267
  11. Izevbekhai, M. O. & Odion, A. O. (2018). Tax Planning and firm value. Nigerian Academy of Management Journal, 13(11), 91-119.
  12. Joseph, U.M., Egbide, B.C., Uche, T.A., David, E.A., Wilson, U.A. & Jane, O. (2020). Optimal tax behaviour and corporate survival: The Nigeria experience. Research in World Economy, 11(6), 108 – 118.
  13. Juwa-Ogboi, C. (2018). Ten problems of Nigerian tax systems and possible solution, available at: https://infoguidenigeria.com/problems‐nige-ria-tax-system/. Accessed on 13/05/2022.
  14. Lanis, R., McClure R. & Zirnsak, M. (2017). Tax aggressiveness of alcohol and bottling companies in Australia. Canberra: Foundation for Alcohol Research and Education, 9(3), 1 – 32.
  15. Lei, L. (2020). Research on the impact of tax shield effect on corporate capital structure. Modern Economy, 11(3), 126-139
  16. Madugba, J. U., & Ogbonnaya, K. A. (2016). An assessment of the relationship between economic growth and indirect taxes in Nigeria. International Journal of Development and Economic Sustainability, 4(5), 56-65.
  17. Mahfoudh H. M., Ku, N. & Izah, K. I. (2015). Tax planning strategies activities: overview of concepts, theories, restrictions, motivations and approaches. Mediterranean Journal of Social Sciences, 6(6), 350 – 358.
  18. Michael, O. (2014). Multiple taxation as a bane of business development in Nigeria. Academic Journal of Interdisciplinary Studies, 3(1), 121 – 214.
  19. Nwaobia A. N, Kwarbai, J. D., and Ogundajo, G. O. (2016). Tax planning and firm value: Empirical evidence from Nigerian consumer goods industrial sector. Research Journal of Finance and Accounting, 7 (2), 172-184
  20. Otuya, S. & Omoye, A. S. (2020). Thin capitalization, effective tax rate and performance of multinational companies in Nigeria. International Accounting and Taxation Research Group, 5(1), 45-59
  21. Oyeshile O. K., Adegbie F. F. (2020). Tax planning strategies and financial performance of quoted food and beverages firms in Nigeria. Journal of Finance and Accounting, 8(6), 272-281.
  22. Rafiu, O. S., Lawrencia O. O. & Olufemi Y. (2017). Granger causality between tax planning strategies and firm value of non-financial quoted companies in Nigeria. International Journal of Business and Social Science, 8(9), 11-20.
  23. Razali, I. L., Ghazali, P. N., Lunyai O. S., & Hwang, D. G. (2018). Tax planning and firm value: evidence from Malaysia. International Journal of Academic Research in Business and Social Sciences, 8(11), 2222-6990.
  24. Setiadharma M., & Machali O. (2017). The effect of asset structure and firm size on firm value with capital structure as intervening variable. Journal of Business and Financial Affairs, 6(4), 12-15.
  25. Silvio, L. L. S., & Rezende, A. J. (2016). Corporate tax avoidance and firm value: Evidence from Brazil. Revistacontemporanea de contabilidade, 13(30), 114-133.
  26. Silvio, L. L. S., & Rezende, A. J. (2016). Corporate tax avoidance and firm value: Evidence from Brazil. Revistacontemporanea de contabilidade, 13(30), 114-133.
  27. Temitope O. F., Taiwo A. O. & Ayobolawole A. O. (2019). The tax planning strategies and financial performance of systemically important banks in Nigeria. Journal of Economics, 8(3), 31 – 48.
  28. Tsado, M. I. & Gunu, U. P. (2016). Manager’s perception of internal factors and their effect on corporate entrepreneurship: the case of Nigerian manufacturing industry. Economica, 12(4), 133-136.
  29. Umeh, V.C., Okegbe, T. O. & Ezejiofor R. A. (2020). Effect of tax planning on firm value of quoted consumer goods manufacturing firms in Nigeria. International Journal of Finance and Banking Research, 6(1), 1-10.
  30. Waluyo, A. & Wirawan, B. I. (2013). Indonesian taxation. Jakarta: Salemba Empat Publisher.
  31. Yimbila, B. H. (2017). Tax planning, corporate governance and performance of banks in Ghana (Doctoral dissertation, University of Cape Coast).