| Peer-Reviewed

Corporate Tax Planning and Financial Performance of Quoted Food and Beverages Firms in Nigeria

Received: 12 August 2020     Accepted: 5 October 2020     Published: 23 November 2020
Views:       Downloads:
Abstract

This study evaluated the effect of corporate tax planning on the financial performance of Quoted food and beverages firms in Nigeria, with a population comprising 15 quoted food and beverages firms on the Nigerian Stock Exchange for ten years between 2008-2018, forming the sample using total enumeration sampling method. The study employed ex-post facto research design. The validity and reliability of the instruments were based on the statutory audit of the financial statement and approval for use by the regulator. The data were analysed using descriptive and influential statistics. From the analysis done, it has shown that corporate tax planning variables of effective tax rate, capital intensity, thin capitalization do not have a significant positive effect on financial performance of a quoted food and beverages firm in Nigeria Adjusted R2= 0.069: F-statistic (input)=8.81, p= 0.0383<0.05). The analysis revealed that all proxies of corporate tax planning practices do not significant effect on return on capital employed of quoted food, and beverages firm in Nigeria (Adjusted R2= 0.038: F-statistic 1.09, p= 0.03537>0.05). All proxies of corporate tax planning practices have a significant positive effect on return on assets of the industry (Adjusted R2= 0.1095: F-statistic 37.76, p= 0.000<0.05). All proxies of corporate tax planning practices have no significant effect on return on equity of the industry (Adjusted R2= 0.0068: F-statistic 0.66, p= 0.957>0.05). Similarly, the result shows all proxies of corporate tax planning practices do not have a significant positive effect on earnings per share of the food and beverages industry (Adjusted R2= 0.068: F-statistic 1.34, p= 0.2639>0.05). Thus, the research concluded that corporate tax planning proxies of effective tax rate, capital intensity and thin capitalisation, has a significant positive effect on the performance of quoted food and beverages firms in Nigeria.

Published in Journal of Finance and Accounting (Volume 8, Issue 6)
DOI 10.11648/j.jfa.20200806.13
Page(s) 266-275
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2020. Published by Science Publishing Group

Keywords

Earnings Per Share, Effective Tax Rate, Return on Capital Employed, Return on Asset, Return on Equity, Thin Capitalisation, Profitability

References
[1] Abiola, J., & Asiweh, M. (2012). Impact of tax administration on government revenue in a developing economy-a case study of Nigeria. International Journal of business and social science, 3(8).
[2] Adeyemi a. Adekunle and samson Disu (2018) Contemporary issues in corporate income tax in Nigeria – a review of precept and practice European Journal of Accounting, Auditing and finance research Vol.6, no.4, pp.59-78, may 2018
[3] Adkins, Matchet & Toy. (2010). EPS – the holy grail or red herring of M & A analysis. Technical update, February.
[4] Aganyo C. A. (2014). The Effects of Corporate Tax Planning on Firm Value for Companies Listed at the Nairobi Securities Exchange. Master’s thesis. University of Nairobi, Kenya.
[5] Ayman Mansour Khalaf Alkhazaleh, M. Al-dwiry (2018). To What Extent Does Financial Leasing Has Impact on the Financial Performance of Islamic Banks: A Case Study of Jordan.
[6] Babalola (2013). The Effect of Firm Size on Firms Profitability in Nigeria. Journal of Economics and Sustainable Development Vol. 4, No.5,
[7] Bammeke, S. A. (2012). Tax implications of the ongoing banking sector reforms in Nigeria. Paper delivered at ICAN 2012 MCPE (Tax Practice Sector), Lagos, March 28 – 29
[8] Bayaraa, Batchimeg. (2017). Financial Performance Determinants of Organizations: The Case of Mongolian Companies. Journal of Competitiveness. 9. 22-33.
[9] Buettner, T., Overesch, M., Schreiber, U., & Wamser, G. (2012). The impact of thin capitalization rules on the capital structure of multinational firms. Journal of public Economic; 96, 930-938.
[10] Chen KP, & Chu CYC (2005). Internal Control vs. External Manipulation:A model of corporate income tax evasion. RAND Journal of Economics 36(4):151-164
[11] Crocker and Slemrod (2005). Corporate Tax Evasion with Agency Cost. Journal of Public Economics, 2005, v89(9-10)
[12] Dada, S. 0. & Adetola, R. (2017). TAX PLANNING AND FIRMS’ PERFORMANCE IN NIGERIA. International Journal of Advance Research, 5(5). 1950-1956.
[13] Deloitte (2017). The new voluntary asset and income declaration scheme in Nigeria. Tax Regulatory Services 3 July 2017
[14] Dragota, V., Tatu, L., Pele, D., Vintila, N. and Semenescu, A. (2010). ‘Capital Budgeting: The Romanian University Professors’ Points of View’, The Review of Finance and Banking, 2(2), pp. 95-102.
[15] Farah, N., Farrukh, I. and Faizan, N. (2016). Financial Performance of Firms: Evidence from Pakistan Cement Industry. Journal of Teaching and Education, 5, 81-94.
[16] Ferede, Ergete & Dahlby, Bev. (2012). The Impact of Tax Cuts on Economic Growth: Evidence from the Canadian Provinces. National Tax Journal. 65. 563-594. 10.17310/ntj.2012.3.03.
[17] Garanina, T., & Petrova, O. (2015). Relationship between liquidity, cash conversion cycle and returns of Russian companies. Korporativnye finansy= Journal of Corporate Finance Research, 9(1), 33-40.
[18] Gilbert Cette & Jimmy Lopez & Jacques Mairesse, 2016."Labour Market Regulations and Capital Intensity," NBER Working Papers 22603, National Bureau of Economic Research, Inc.
[19] Graham, J. R., Campbell, R. H. & Rajgopal, S. (2005), The economic implications of corporate financial reporting. Working paper, 11 January, Available at SSRN: https://ssrn.com/abstract=647705
[20] Gravelle, J. G., & Marples, D. J. (2014). Tax rates and economic growth. Washington, DC: Congressional Research Service.
[21] Gupta, Sanjay & Newberry, Kaye. (1997). Determinants of the Variability in Corporate Effective Tax Rate. Journal of Accounting and Public Policy. 16. 1-34.
[22] Ibrahim, Nabil. (2012). A proposed model to measure the impact of tax planning upon the financial performance of joint stock companies listed in the Egyptian financial market (A field empirical study). A study submitted to the conference of the Egyptian tax association that was held on 16th and 17th, September 2012 titled as “the future tax system and its impact upon economy and investment”.
[23] Isabwa Harwood Kajirwa & Omete F. Ikapel (2016). Operating Lease financing and financial Performance of State owned sugar manufacturingfirms in Kenya. International Journal of Re s earch in Finance and Marke ting Vol. 6 Issue 9, pp. 56~62.
[24] James O. Abiola & Moses Asiweh (2012). Impact of Tax Administration on Government Revenue in a Developing Economy - A Case Study of Nigeria. International Journal of Business and Social Science Vol. 3 No. 8
[25] Junaidu & Hauwa (2018). Corporate Tax and Financial Performance of Listed Nigerian Consumer Goods. Journal of Accounting and Financial Management Vol. 4 No.4
[26] Ikpefan, O. A. & Owolabi, F. (2014). Working capital management and profitability of the manufacturing sector: An empirical investigation of Nestle Nigeria plc and Cadbury Nigeria plc. Global Journal of Management and Business Research, 14(4).
[27] Kawor, S & Kportorgbi, H. k. (2014). Effect of tax planning on firms’ market performance: evidence from listed firms in Ghana. International Journal of Economics and Finance, 6(3), 162 – 168.
[28] Khalid, A. A. A., Mohammad, A. F. A. & Firas, N. R. H. (2017). The Impact of Tax Planning in Industrial Public Joint Stock Companies upon the Performance of the Industrial Companies Listed in the Amman Stock Exchange Market. Accounting and Finance Research, 6(2). 12-25.
[29] Khan, M. M. & Safiuddin, S. K. (2016). Liquidity and profitability performance analysis of select pharmaceutical companies. International Journal of Science Technology and Management, 5(1).
[30] Knesl, J. (2018). Capital intensity and investment shocks: Implications for stock returns. SSRN Electronic Journal, 1(1), 1-62. DOI: 10.2139/ssrn.3019782.
[31] Li, Frank & Dang, Chongyu. (2013). Measuring Firm Size in Empirical Corporate Finance. Journal of Banking & Finance. 2018 forthcoming. 10.2139/ssrn.2345506
[32] Madugba, J. U., Ogbonnaya, A. K. & Okpe I. I. (2016). An assessment of the casual relationship between economic growth and indirect taxes in Nigeria. International Journal of Development and Economic Sustainability Vol.4, No.5, pp.56-65.
[33] Maiga, S. (2015). The Impact of Tax Collection in Achieving Revenue Targets: The Directorate General of Taxes of Mali Case Study. Theoretical Economics Letters, 5(1). 403-409.
[34] Mathew Olusanya Gbonjubola(2016). ‘Transfer Pricing and Thin Capitalization’. (Paper delivered at the Chartered Institute of Taxation of Nigeria (CITN) 2016 Tax Conference).
[35] Mohammad, R. P., Mahmoud, S., & Ensieh, K. (2013). The study of relationship between capital intensity and finanacial leverage with degree of financial distress in companies listed in Tehran Stock Exchange. European Journal of Operational Research, 4(11). 3830-3839.
[36] Nwaobia, A. N. (2014). Tax Planning and corporate financial performance of selected manufacturing companies in Nigeria. IJRDO-Journal of Business Management, 1(4), 21-34.
[37] Nwaobia, A. N., & Jayeoba, O. O. (2016). Tax planning and firms’ liquidity. IJRDO-Journal of Business Management, 1(4), 21-34.
[38] Nwaobia, A. N., Kwarbai, J. D., & Ogundajo, G. O. (2016). Tax planning and firm value: Empirical evidence from Nigerian consumer goods industrial sector. Research Journal of Finance and Accounting, 7 (12), 172 – 183.
[39] Olaoye Clement Olatunji& Bamisaye Theresa Omolade(2018). Deferred tax and financial performance of firms in Nigeria. Journal of Business Administration and Management Sciences Research Vol. 7(2), pp. 050-058.
[40] Ogundajo, G. O. and Onakoya, A. B. (2016). Tax planning and financial performance of Nigerian manufacturing companies. International Journal of Advanced Academic Research (Social & Management Sciences), 2(7). 64-80.
[41] Ohlson, J. A. & Juettner-Nauroth, B. E. (2005). Expected EPS and EPS growth as determinants of value. Review of Accounting Studies, 10(1). 349-365.
[42] Onyekwelu, U, L., Nnadi, C. S. & Iyidiobi, F. E. (2018). Evaluation of Firms’ Corporate Financial Indicators and Operational Performance of Selected Firms in Nigeria. Research Journal of Finance and Accounting, 9(4), 20–29.
[43] Owolabi, S. A. & Makinde, O. G. (2012). The Effects of Strategic Planning On Corporate Performance In University Education: A Study Of Babcock University Kuwait Chapter Of Arabian Journal Of Business And Management Review 2(4), 28 – 44.
[44] Pniowsky, J. (2010). Aggressive tax planning-How aggressive is too aggressive. Thompson Dorfman Sweatman LLP, 3, 1-3.
[45] Pradip Kumar Das(2017). Impact of Return on Capital Employed On Company Performance – An Introspection in India. Saudi Journal of Business and Management Studies.
[46] Pratama, A. (2017). Does corporate governance reduce thin capitalization practice? The case of Indonesian Manufacturing firms. Review of integrative Business and Economic Research. 6 (4).
[47] Pendleton, A. (2019). Financial participation in Europe: opportunities and risks for employees. ETUI Research Paper-Policy Brief, 1.
[48] Rappaport, A. (2005). The economics of short-term performance obsession. Financial Analysts Journal, 61(3). 65-79.
[49] Salawu, R., Ogundipe, L., & Yeye, O. (2017). Granger Causality between Corporate Tax Planning and Firm Value of Non-Financial Quoted Companies in Nigeria. International Journal of Business and Social Science, 8(9). 91-103.
[50] Setiadharma & Machali (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.
[51] Slemrod J (2004). The Economics of Corporate Tax Selfishness. National Tax Journal 57(4):877-899.
[52] Stickney, C. P., & McGee, V. E. (1982). Effective corporate tax rates. The effect of size, capital intensity, leverage, and other factors. Journal of Accounting and Public Policy, 1, 125–152.
[53] Taboga, M. (2011), Under– and over-valuation of the stock market and cyclically adjusted earnings. International Finance, Vol. 14, No. 1, pp. 135-164.
[54] Tatu, Lucian & Dragota, Victor & Vintila, Nicoleta. (2011). An Observation on the Effective Tax Rate for Corporate Income in Romania. Economic computation and economic cybernetics studies and research / Academy of Economic Studies. 45. 91-106.
[55] Tsado, M. & Gunu, U. (2016). Managers’ perception of internal factors and their effect on corporate entrepreneurship: the case of Nigerian manufacturing industry. Economica, 12( 4).
[56] Turner, F. J. (Ed.). (2017). Social work treatment: Interlocking theoretical approaches. Oxford University Press.
[57] Tye & Nor (2018). Roles of tax planning in market valuation of corporate social responsibility. JournalCogent Business & Management Volume 5, Issue 1.
[58] Yimbila, B. (2017). Tax planning, corporate governance and performance of banks in Ghana (Doctoral dissertation, University of Cape Coast).
[59] Zevenbergen, L. (2018). Firm performance and tax avoidance. Retrievedfromhttps://pdfs.semanticscholar.org/0429/edbfbe5d511ba9150ec76600df3055b4dda8.pdf
[60] Zwingina Christy Twaliwi & Opusunju Michael Isaac (2017). Impact of Innovation on the Performance of Small and Medium Scale Enterprise in Gwagwalada, Abuja. International Journal of Entrepreneurial Development, Education and Science Research Vol. 4, No.1.
Cite This Article
  • APA Style

    Oyeshile Oladapo Kayode, Adegbie Festus Folajinmi. (2020). Corporate Tax Planning and Financial Performance of Quoted Food and Beverages Firms in Nigeria. Journal of Finance and Accounting, 8(6), 266-275. https://doi.org/10.11648/j.jfa.20200806.13

    Copy | Download

    ACS Style

    Oyeshile Oladapo Kayode; Adegbie Festus Folajinmi. Corporate Tax Planning and Financial Performance of Quoted Food and Beverages Firms in Nigeria. J. Finance Account. 2020, 8(6), 266-275. doi: 10.11648/j.jfa.20200806.13

    Copy | Download

    AMA Style

    Oyeshile Oladapo Kayode, Adegbie Festus Folajinmi. Corporate Tax Planning and Financial Performance of Quoted Food and Beverages Firms in Nigeria. J Finance Account. 2020;8(6):266-275. doi: 10.11648/j.jfa.20200806.13

    Copy | Download

  • @article{10.11648/j.jfa.20200806.13,
      author = {Oyeshile Oladapo Kayode and Adegbie Festus Folajinmi},
      title = {Corporate Tax Planning and Financial Performance of Quoted Food and Beverages Firms in Nigeria},
      journal = {Journal of Finance and Accounting},
      volume = {8},
      number = {6},
      pages = {266-275},
      doi = {10.11648/j.jfa.20200806.13},
      url = {https://doi.org/10.11648/j.jfa.20200806.13},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jfa.20200806.13},
      abstract = {This study evaluated the effect of corporate tax planning on the financial performance of Quoted food and beverages firms in Nigeria, with a population comprising 15 quoted food and beverages firms on the Nigerian Stock Exchange for ten years between 2008-2018, forming the sample using total enumeration sampling method. The study employed ex-post facto research design. The validity and reliability of the instruments were based on the statutory audit of the financial statement and approval for use by the regulator. The data were analysed using descriptive and influential statistics. From the analysis done, it has shown that corporate tax planning variables of effective tax rate, capital intensity, thin capitalization do not have a significant positive effect on financial performance of a quoted food and beverages firm in Nigeria Adjusted R2= 0.069: F-statistic (input)=8.81, p= 0.0383R2= 0.038: F-statistic 1.09, p= 0.03537>0.05). All proxies of corporate tax planning practices have a significant positive effect on return on assets of the industry (Adjusted R2= 0.1095: F-statistic 37.76, p= 0.000R2= 0.0068: F-statistic 0.66, p= 0.957>0.05). Similarly, the result shows all proxies of corporate tax planning practices do not have a significant positive effect on earnings per share of the food and beverages industry (Adjusted R2= 0.068: F-statistic 1.34, p= 0.2639>0.05). Thus, the research concluded that corporate tax planning proxies of effective tax rate, capital intensity and thin capitalisation, has a significant positive effect on the performance of quoted food and beverages firms in Nigeria.},
     year = {2020}
    }
    

    Copy | Download

  • TY  - JOUR
    T1  - Corporate Tax Planning and Financial Performance of Quoted Food and Beverages Firms in Nigeria
    AU  - Oyeshile Oladapo Kayode
    AU  - Adegbie Festus Folajinmi
    Y1  - 2020/11/23
    PY  - 2020
    N1  - https://doi.org/10.11648/j.jfa.20200806.13
    DO  - 10.11648/j.jfa.20200806.13
    T2  - Journal of Finance and Accounting
    JF  - Journal of Finance and Accounting
    JO  - Journal of Finance and Accounting
    SP  - 266
    EP  - 275
    PB  - Science Publishing Group
    SN  - 2330-7323
    UR  - https://doi.org/10.11648/j.jfa.20200806.13
    AB  - This study evaluated the effect of corporate tax planning on the financial performance of Quoted food and beverages firms in Nigeria, with a population comprising 15 quoted food and beverages firms on the Nigerian Stock Exchange for ten years between 2008-2018, forming the sample using total enumeration sampling method. The study employed ex-post facto research design. The validity and reliability of the instruments were based on the statutory audit of the financial statement and approval for use by the regulator. The data were analysed using descriptive and influential statistics. From the analysis done, it has shown that corporate tax planning variables of effective tax rate, capital intensity, thin capitalization do not have a significant positive effect on financial performance of a quoted food and beverages firm in Nigeria Adjusted R2= 0.069: F-statistic (input)=8.81, p= 0.0383R2= 0.038: F-statistic 1.09, p= 0.03537>0.05). All proxies of corporate tax planning practices have a significant positive effect on return on assets of the industry (Adjusted R2= 0.1095: F-statistic 37.76, p= 0.000R2= 0.0068: F-statistic 0.66, p= 0.957>0.05). Similarly, the result shows all proxies of corporate tax planning practices do not have a significant positive effect on earnings per share of the food and beverages industry (Adjusted R2= 0.068: F-statistic 1.34, p= 0.2639>0.05). Thus, the research concluded that corporate tax planning proxies of effective tax rate, capital intensity and thin capitalisation, has a significant positive effect on the performance of quoted food and beverages firms in Nigeria.
    VL  - 8
    IS  - 6
    ER  - 

    Copy | Download

Author Information
  • Department of Accounting, Babcock University, Ilishan-Remo, Nigeria

  • Department of Accounting, Babcock University, Ilishan-Remo, Nigeria

  • Sections