Abstract:
This study sought to determine the effect of financial performance on corporate taxes
among firms listed at the NSE. The population for the study was all the 65 companies
listed at NSE as at 31 st December 2018. Data was obtained from 56 firms that were
consistently listed for the five years (2014 to 2018) giving the researcher 280 data
points. The independent variables for the study were profitability as measured by
return on equity, firm value as measured by market value of equity to book value of
equity and firm efficiency as measured by the ratio of total revenue to total assets
whereas corporate taxes as measured by effective tax rate was the dependent variable.
The study used secondary data that was collected over the period of study of five year
(2014-2018) on annual basis. The research design was cross sectional design while
the data was analyzed using multiple linear regression so as to find out the association
amongst the variables. Stata version 13 was used for data analysis purposes. The
study found that profitability (β=0.032, p=0.029), firm value (β=0.095, p=0.000) and
firm efficiency (β=0.082, p=0.001) had a positive and significant relationship with
corporate taxes among NSE listed firms. The results also indicated R 2 of 0.1468
which implied that profitability, firm value and firm efficiency contributed 14.68% to
variations in corporate taxes. It was shown by the ANOVA outcomes that the F
statistic is significant at 5 % significance level with P=0.000. It was therefore
appropriate to use this model in explaining the relationship. Further the results
exhibited that all the independent variable profitability, firm value and firm efficiency
produced positive and statistically significant values for this study. The study
recommends government through the policy makers should create a conducive
environment for the firms listed at the NSE which translates to more profitability
leading to more corporate taxes and consequently triggering economic growth. Firms
should also seek ways of increasing their assets base which would translate to more
corporate taxes and consequently leading to a better environment. The study further
recommends the need for listed firms to hire managers that are dedicated and
competent enough to enhance firm efficiency and firm value as these two were also
found to enhance the level of corporate taxes. To achieve this, firms might have to
incur agency costs with an aim of aligning the goals of managers with those of
shareholders.
