Tax Avoidance and Firm Value of Selected Firms in Nigeria
##plugins.themes.EpsilonTheme.article.main##
Malobi Gladys Okolie*
Moses Onyeka Chukuwendu
This research investigates the relationship between tax avoidance strategies and company value among publicly traded non-financial corporations in Nigeria. The researchers developed two hypotheses to guide their investigation and utilized an ex-post facto research approach. They measured firm value using Tobin's Q as the outcome variable, while examining book-tax differences and cash effective tax rates as the key explanatory factors. The analysis focused on 76 publicly listed non-financial companies from the Nigerian Exchange Group, covering a ten-year period from 2014 to 2023. The researchers applied feasible generalized least squares regression analysis using STATA 14.2 software to process the data. The results revealed that book-tax differences significantly influence Tobin's Q among the studied Nigerian non-financial firms (with statistical significance at p < 0.05). However, cash effective tax rates showed no meaningful impact on firm value (p > 0.05). Based on these findings, the researchers suggest that companies should prioritize strategic tax planning to better manage disparities between book and tax reporting, which could improve their perceived financial performance and boost investor confidence.
Abid, A., Shaique, M., & Anwar ul Haq, M. (2018). Do Big Four Auditors Always Provide Higher Audit Quality? Evidence from Pakistan. International Journal of Financial Studies, 6(2), 58. https://doi.org/10.3390/ijfs6020058
Aktaş, R., & Karğın, S. (2012). Predictive Ability of Earnings and Cash Flows: Evidence from Turkish Firms’ Cash Flow Statements Prepared by IAS 7. Journal of Money, Investment and Banking, 25, 171–180.
Amuzu, M. S. (2010). Cash flow ratio as a measure of performance of listed companies in emerging economies: The Ghana example. Unpublished PhD Dissertation. Retrieved from Http://Stclements. Edu/Grad/Gradmaxw. Pdf.
Chen, S., Chen, X., Cheng, Q., & Shevlin, T. (2010). Are family firms more tax aggressive than non-family firms? Journal of Financial Economics, 95(1), 41–61. https://doi.org/10.1016/j.jfineco.2009.02.003
Daily, C. M., Dalton, D. R., & Cannella, A. A. (2003). Corporate Governance: Decades of Dialogue and Data. The Academy of Management Review, 28(3), 371. https://doi.org/10.2307/30040727
Davis, J. H., Schoorman, F. D., & Donaldson, L. (1997). Toward a Stewardship Theory of Management. The Academy of Management Review, 22(1), 20. https://doi.org/10.2307/259223
Denzin, N. K., & Lincoln, Y. S. (2011). The SAGE Handbook of Qualitative Research. Sage Publications.
Desai, M. A., & Dharmapala, D. (2006). Corporate tax avoidance and high-powered incentives. Journal of Financial Economics, 79(1), 145–179. https://doi.org/10.1016/j.jfineco.2005.02.002
Edwards, A. S., Schwab, C., & Shevlin, T. J. (2012). Financial Constraints and the Incentive for Tax Planning. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.2163766
Eisenhardt, K. M. (1989). Agency Theory: An Assessment and Review. The Academy of Management Review, 14(1), 57. https://doi.org/10.2307/258191
Evangelos, C. (2019). The informative value of taxes: The case of temporal differences in tax accounting. Journal of Accounting and Taxation, 11(8), 130–138. https://doi.org/10.5897/JAT2019.0350
Ezugwu, C. I., & Akubo, D. (2014). Effect of High Corporate Tax Rate on the Liquidity of Corporate Organizations in Nigeria-A study of Some Selected Corporate Organizations. Global Journal of Management and Business Research: D Accounting and Auditing, 14(3).
Frank, B. P., & James, O. K. (2014). Cash flow and corporate performance: A study of selected food and beverages companies in Nigeria. European Journal of Accounting Auditing and Finance Research, 2(7), 77–87.
Goldman, N. C. (2016). The effect of tax aggressiveness on investment efficiency. The University of Arizona.
Hair, J. F., Black, W. C., Babin, B. J., Anderson, R. E., & Tatham, R. L. (2006). Multivariate data analysis: Pearson prentice Hall. Upper Saddle River, NJ, 1–816.
Hanlon, M., & Heitzman, S. (2010). A Review of Tax Research. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.1476561
Hanlon, M., Krishnan, G. V., & Mills, L. F. (2012). Audit Fees and Book-Tax Differences. Journal of the American Taxation Association, 34(1), 55–86. https://doi.org/10.2308/atax-10184
Harrington, C., Smith, W., & Trippeer, D. (2012). Deferred tax assets and liabilities: tax benefits, obligations and corporate debt policy. Journal of Finance and Accountancy, 11, 1.
Hasan, I., Kim, I., Teng, H., & Wu, Q. (2016). The Effect of Foreign Institutional Ownership on Corporate Tax Avoidance: International Evidence. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.2829327
Innocent, Onyali, C., & Gloria, Okafor, T. (2018). Effect of Corporate Governance Mechanisms on Tax Aggressiveness of Quoted Manufacturing Firms on the Nigerian Stock Exchange. Asian Journal of Economics, Business and Accounting, 8(1), 1–20. https://doi.org/10.9734/AJEBA/2018/38594
Khuong, N. V., Ha, N. T. T., Minh, M. T. H., & Thu, P. A. (2019). Does corporate tax avoidance explain cash holdings? The case of Vietnam. Economics & Sociology, 12(2), 79–93. https://doi.org/10.14254/2071-789X.2019/12-2/5
Kim, W. J., & Jang, G. B. (2018). Relationship between Tax Avoidance and Key Financial Indicators in Korea’s Construction Waste Disposal Industry. Academy of Accounting and Financial Studies Journal, 22(3), 1–12.
Kouki, M., & Guizani, M. (2015). Outside directors and firm performance: The moderating effects of ownership and board leadership structure. International Business Research, 8(6), 104.
Lee, B. B., Dobiyanski, A., & Minton, S. (2015). Theories and Empirical Proxies for Corporate Tax Avoidance. Journal of Applied Business & Economics, 17(3).
Lisowsky, P., Robinson, L. A., & Schmidt, A. P. (2012). Do Publicly Disclosed Tax Reserves Tell Us About Privately Disclosed Tax Shelter Activity? SSRN Electronic Journal. https://doi.org/10.2139/ssrn.1481488
Manzon, Jr., G. B., & Plesko, G. A. (2001). The Relation Between Financial and Tax Reporting Measures of Income. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.264112
Means, G. (2017). The modern corporation and private property. Routledge.
Meckling, W. H., & Jensen, M. C. (1976). Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure. Springer.
Namazi, M. (2013). Role of the agency theory in implementing managements control. Journal of Accounting and Taxation, 5(2), 38–47. https://doi.org/10.5897/JAT11.032
Noga, T. J., & Schnader, A. L. (2013). Book-Tax Differences as an Indicator of Financial Distress. Accounting Horizons, 27(3), 469–489. https://doi.org/10.2308/acch-50481
Nwaiwu, N. J., & Oluka, N. O. (2018). Environmental cost disclosure and financial performance of oil and gas in Nigeria. International Journal of Advanced Academic Research, 4(2), 1–23.
Ogbonnaya, A. K., Ekwe, M. C., & Uzoma, I. J. (2016). Relationship of Cash Flow Ratios and Financial Performance of Listed Banks in Emerging Economies – Nigeria Example. European Journal of Accounting, Auditing and Finance Research, 4(4). https://doi.org/10.37745/ejaafr.2013
Pratt, J. W., & Kulsrud, W. N. (2008). Individual Taxation. Cengage Learning. https://books.google.co.id/books?id=pvjDLwAACAAJ
Revsine, L., Collins, D. W., & Johnson, W. B. (2002). Financial Reporting & Analysis. Prentice Hall. https://books.google.co.id/books?id=WgNFAAAAYAAJ
Richardson, G., & Lanis, R. (2007). Determinants of the variability in corporate effective tax rates and tax reform: Evidence from Australia. Journal of Accounting and Public Policy, 26(6), 689–704. https://doi.org/10.1016/j.jaccpubpol.2007.10.003
Ross, S. A. (1973). The Economic Theory of Agency: The Principal’s Problem. The American Economic Review, 63(2), 134–139. http://www.jstor.org/stable/1817064
Ruan, W., Tian, G., & Ma, S. (2011). Managerial Ownership, Capital Structure and Firm Value: Evidence from China’s Civilian-run Firms. Australasian Accounting, Business and Finance Journal, 5.
Ruangviset, J., Jiraporn, P., & Kim, J. C. (2014). How does Corporate Governance Influence Corporate Social Responsibility? Procedia - Social and Behavioral Sciences, 143, 1055–1057. https://doi.org/10.1016/j.sbspro.2014.07.554
Rui, J. (2019). Effect of Corporate Tax Avoidance on the Investment-cash Flow Sensitivity. Journal of Physics: Conference Series, 1237(2), 022050. https://doi.org/10.1088/1742-6596/1237/2/022050
Salawu, R. O. (2017). Corporate Governance and Tax Planning Among Non-Financial Quoted Companies in Nigeria. African Research Review, 11(3), 42. https://doi.org/10.4314/afrrev.v11i3.5
Santa, S. L. L., & Rezende, A. J. (2016). Corporate tax avoidance and firm value: from Brazil. Revista Contemporânea de Contabilidade, 13(30), 114–133.
Shafai, N. A. B., Amran, A. Bin, & Ganesan, Y. (2018). Earnings management, tax avoidance and corporate social responsibility: Malaysia evidence. Management, 5(3), 41–56.
Slemrod, J., & Yitzhaki, S. (2002). Tax avoidance, evasion, and administration. In Handbook of public economics (Vol. 3, pp. 1423–1470). Elsevier.
Tang, T. Y. H. (2006). Book-tax differences: a function of accounting tax misalignment, earnings management and tax management. The Australian National University. https://doi.org/10.25911/5d626fd2c89b2
Wei Ling, T., & Abdul Wahab, N. S. (2018). Roles of tax planning in market valuation of corporate social responsibility. Cogent Business & Management, 5(1), 1482595. https://doi.org/10.1080/23311975.2018.1482595
Wijaya, L. A., & Atahau, A. D. R. (2021). Profitability and sustainable growth of manufacturing firms: Empirical evidence from Malaysia and Indonesia. Jurnal Riset Akuntansi Dan Keuangan, 9(1), 13–24.
