TAX OPTIMIZATION AND FINANCIAL PERFORMANCE OF LISTED MANUFACTURING FIRMS IN NIGERIA: DOES FIRM SIZE MATTERS?

Abstract

This study investigated the moderating influence of firm size on the association between tax optimization and financial performance of listed manufacturing firms in Nigeria. Hoffman tax planning theory was adopted as the underpinning theory. This study used ex post facto research design with a population of 60 manufacturing firms listed on the Nigeria Exchange Group (NGX) as at 31 December, 2022 and a sample size of 30 manufacturing firms using purposive sampling technique. Secondary data was collected from the financial statements of sampled manufacturing firms and the study used descriptive statistic, unit root test, diagnostics test (Hausman Test, Residual Cross-Section Dependence Test and residuals histograms test) and panel least square (PLS) with the help of E-view Version 10 while moderated multiple regression (MMR) analysis was employed for the purpose of moderating effect with the assistance of SPSS Version 25 for data analysis. The result from the analysis indicated that effective tax rate (ETR) positively and significantly affect return on assets (ROA); tax savings (TAS) does negatively and significantly affect return on assets (ROA); thin capitalization (TCN) does positively and insignificantly affect return on assets (ROA); capital intensity (CAI) does positively and insignificantly affect return on assets (ROA) and firm size does have positive and significant effects on the relationship between tax optimization and financial performance of listed manufacturing firms in Nigeria. Hence on the basis of the findings, the study concludes that firm size moderates the association between tax optimization and financial performance of firms. The study recommended amongst others that manufacturing firms in Nigeria should ensure that tax returns and controls are managed by tax professionals for effective and efficient tax optimization and better financial performance of listed companies