Abstract
This study determined the effect of tax planning on firm value in quoted consumer goods manufacturing firms in Nigeria. The specific objectives are to: Determine the effect of Effective Tax Rate (ETR) on firm value of Nigerian consumer goods manufacturing companies; Ascertain the effect of Book Tax Differences (BTDs) on the firm value of Nigerian consumer goods manufacturing companies. Ex-post facto research design was adopted for the study. A sample size 21 of firms was selected based on availability of the financial statement of the selected firms from the population of all the non-financial quoted on the Nigeria Stock Exchange. Data for the study will be obtained from annual published financial of the non-financial covering a period of ten years from 2009-2018. Ordinary lease square regression was used to test the three formulated hypotheses with the aid of E-View 9.0. This study found that Effective tax rate (ETR) to impact negatively on firm value, but this impact was statistically significant. However, the study found that, book tax difference (BTD); impact positively on firm value, but this impact was not statistically significant. The study therefore recommended among others that since the influence of effective tax rate is statistically significant and so, should be used as a determinant of firm value in Nigeria. Therefore on the basis of efficient use of tax rate to generate growth should be encouraged.
Highlights
Tax is one of the major instruments of fiscal policy for regulating the economy of any nation
While Effective tax rate (ETR), Dividend (DIV) and Firm age (FAG) are positively and significantly related to firm value
Model Specification In testing for the value relevance of corporate tax avoidance and in testing for the moderating effect of agency cost mitigating variables on the nexus, we adapt a firm-value model originally derived from Ohlson (1995) and have been widely used in value relevance studies including those that relates to tax avoidance as used by Abdul Wahab and Holland (2012)
Summary
Tax is one of the major instruments of fiscal policy for regulating the economy of any nation. Successive governments in Nigeria have employed the instrument of tax policy to encourage industrial and corporate growth in the private sector [1]. As noted by Gatsi, taxation, observably, plays a role in the misfortunes of the manufacturing sector because tax policies, apart from generating revenue for the state, serve several other purposes [2]. It can be used as an avenue to protect infant industries, create incentive for investors to invest in certain areas of the economy or to create disincentive for other activities Gatsi, Gadzo and Kportorgbi, [2]. In Sub-Sahara Africa, corporate bodies are liable to pay Company Income Tax on their assessable profit in line with the relevant tax laws in the various countries [4]
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