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Assessing the Effects of Corporate Taxation on the Investment Policy of Manufacturing Firms in Nigeria

Author

Listed:
  • Akinleye Gideon T.

    (Ekiti State University, Faculty of Management Sciences, Department of Accounting, PMB 5351, Ado-Ekiti, Nigeria)

  • Olarewaju Odunayo M.

    (Durban University of Technology, Faculty of Accounting and Informatics, Department of Management Accounting, P.O. Box 1334, Durban, 4000, South Africa)

  • Fajuyagbe Samson B.

    (Ekiti State University, Faculty of Management Sciences, Department of Accounting, PMB 5351, Ado-Ekiti, Nigeria)

Abstract

Research Background: The complexities of taxes in business have a tendency of endangering investment decisions at every point in time, if such complexities are not strategically managed.Purpose: This study therefore assesses the effect of corporate taxation on the investment policy of quoted manufacturing firms in Nigeria.Research Methodology: Secondary data sourced from annual reports of the selected firms were analysed using descriptive and inferential statistics. Specifically, static panel least square regression techniques were used.Result: The results of the study revealed that company income tax (CIT) is positively related to the investment decision of the quoted manufacturing firm (INV), and thus enhances the investment of the quoted manufacturing firm (INV) in Nigeria. The probability value revealed that company income tax (CIT) had a statistical significant correlation with the investment of the quoted manufacturing firm in Nigeria. This implies that higher corporate income taxes are associated with lower investment in manufacturing firms.Novelty: This study digressed from examining the effects of corporate tax on financial performance as that was the major focused area in this context. However, this study assessed its effect on investment decisions. Hence, this study was able to recommend that the Nigerian government should encourage and enhance manufacturing investment decision by designing an appropriate corporate income tax policy. An investment decision that is fostered on new capital, encourages the implementation of new production techniques and thus should be engineered for the development of manufacturing firms.

Suggested Citation

  • Akinleye Gideon T. & Olarewaju Odunayo M. & Fajuyagbe Samson B., 2019. "Assessing the Effects of Corporate Taxation on the Investment Policy of Manufacturing Firms in Nigeria," Folia Oeconomica Stetinensia, Sciendo, vol. 19(2), pages 7-24, December.
    • Handle: RePEc:vrs:foeste:v:19:y:2019:i:2:p:7-24:n:1
    DOI: 10.2478/foli-2019-0010
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    References listed on IDEAS

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    1. Adelegan, Olatundun, 2006. "Effects of taxes financing decisions and firm value in Nigeria," Proceedings of the German Development Economics Conference, Berlin 2006 1, Verein für Socialpolitik, Research Committee Development Economics.
    2. Cordelia Onyinyechi Omodero & Amah Kalu Ogbonnaya, 2018. "Corporate Tax and Profitability of Deposit Money Banks in Nigeria," Journal of Accounting, Business and Finance Research, Scientific Publishing Institute, vol. 3(2), pages 47-55.
    3. Laura Vartia, 2008. "How do Taxes Affect Investment and Productivity?: An Industry-Level Analysis of OECD Countries," OECD Economics Department Working Papers 656, OECD Publishing.
    4. Zee, Howell H. & Stotsky, Janet G. & Ley, Eduardo, 2002. "Tax Incentives for Business Investment: A Primer for Policy Makers in Developing Countries," World Development, Elsevier, vol. 30(9), pages 1497-1516, September.
    5. Louis T., Jr. Wells & Nancy J. Allen & Jacques Morisset & Neda Pirnia, 2001. "Using Tax Incentives to Compete for Foreign Investment : Are They Worth the Costs?," World Bank Publications - Books, The World Bank Group, number 13979, April.
    6. Raza, Syed Ali & Ali, Syed Adeel & Abassi, Zia, 2011. "Effect of corporate income tax and firms’ size on investment: evidence by Karachi stock exchange," MPRA Paper 36800, University Library of Munich, Germany.
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    Cited by:

    1. Suleiman Ahmed Hadiza & Mohammed Garba Abubakar, 2024. "Corporate Tax and Liquidity of Deposit Money Banks in Nigeria," International Journal of Research and Scientific Innovation, International Journal of Research and Scientific Innovation (IJRSI), vol. 11(7), pages 896-908, July.

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    More about this item

    Keywords

    corporate income tax; investment decision; manufacturing firms; panel data regression;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General

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