Abstract
This study examined the effect of tax planning on firm value of manufacturing firms listed at the Nairobi Securities Exchange for a ten-year period 2010 to 2019. Specifically, the study sought to: evaluate the influence of assets’ tangibility on firm value of manufacturing firms listed at the Nairobi Securities Exchange; determine the influence of leverage on firm value of manufacturing firms listed at the Nairobi Securities Exchange; and establish the effect of effective tax rate on firm value of manufacturing firms listed at the Nairobi Securities Exchange. The study was anchored on three theories: the pecking order theory; the agency theory and the political power theory. The study adopted longitudinal research survey and employed panel least squares analysis. The population of this study was all the 13 manufacturing companies listed on the manufacturing, construction and allied sectors of the Nairobi Securities Exchange as of December 2020. Due to the small number of firms, census technique was adopted and hence sampling was be required. Findings of the study indicated that asset tangibility had a positive, though statistically insignificant effect on firm value. Leverage was found to have a positive and a statistically significant relationship with firm value. Furthermore, results of the study indicated that effective tax rate had a positive and statistically significant influence on firm value.
Highlights
Establish the effect of effective tax rate on firm value of manufacturing firms listed at the Nairobi Securities Exchange
The study concluded that there was no Multicollinearity and the model was deemed fit for further analysis. 4.3.3 Test for Autocorrelation To establish whether or not the residuals were serially correlated over time, Breusch Pagan Langrage Multiplier (LM), Pesaran Scaled Langrage Multiplier and Pesaran Cross sectional Dependence (CD) tests were carried out
This implies that the pecking order theory and the agency cost theory were applicable to listed manufacturing firms in Kenya
Summary
Exchange (NSE) has a count of 61 firms that it has listed. These fall into 11 sectors. The listed firms perform differently in terms of their profitability as well as share values In terms of their tax management practices, some pay larger taxes than others and this call for an examination of their tax management practices. The research proposes to concentrate on firms listed under manufacturing and allied and construction and allied sectors out of which (9 companies) data is utilised in this study (panel data). These companies have varied ownership structures and are generally in manufacturing concerns. Some are state owned with the Government of Kenya having majority shares They all have attachment in operations, assets base and outputs in the area of manufacturing or construction
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