The Impact Analysis of Investment Decisions on Taxations of Corporate Organisations: An Empirical Studies from Nigeria

  • Muniru Haruna

Abstract

The research work titled “impact analysis of investment decisions on taxations of corporate organisations in Nigeria” was carried out with the primary aims of investigating whether the choice debt over equity has significant impact on taxes in Nigeria. It also surveyed on the influence of capital expenditure of corporate entities on their taxes and whether the working capital management can be used in tax planning of corporations in Nigeria. The original propositions, as well as the principles of Modigliani and Miller's Theorem (1958), indicate that there is a completely efficient market with no taxes, transactions, or bankruptcy costs, and that all participants have access to a wealth of information. Modigliani and Miller included the influence of taxes to their model in 1963, bringing the theory closer to reality (Adegbite and Shittu, 2017). The researcher opted to limit the study to an object (i.e. Federal Capital Territory Abuja) thereby selecting 5 industries selected from the Nigerian Stock Exchange to include Financial services, construction/real estate, oil and gas, consumer goods and information and communication technology (ICT) with a total of five (5) corporate organizations as respondents Selected from the population. In terms of the research issue, the findings were expanded to the entire population. At the conclusion of the study, the researcher determined that the choice of debt over equity, capital expenditure, and working capital over taxes of business organizations in Nigeria had no statistically significant influence. The researcher finally recommended that enough processes should be in place at all times to ensure that all types of taxes in Nigeria are correctly accounted for and filed with the relevant tax authority and that corporate organisations in Nigeria require the services of tax consultants in order to incorporate proper tax planning mechanism in their business dealings.

References

Adegbite, T. A., & Shittu, S. A. (2017). The analysis of the impact of corporate income tax on investment in Nigeria, World Wide Journal of Multidisciplinary Research and Development, e-ISSN: 2454-6615 retrieved from http://www.wwjmrd.com
Adefila, J. J. (2008). Research Methodology in Behavioural Sciences, Kaduna, Aprin Publication
Adegbite, A. T. (2015). The Analysis of the Effect of Corporate Income Tax (CIT) on Revenue Profile in Nigeria. American Journal of Economics, Finance and Management, 1(4), 2015, 312-319.
Ahmeti, F. (2015). A Critical Review of Modigliani and Miller’s Theorem of Capital Structure, International Journal of Economics, Commerce and Management, 3(6), June 2015. Retrieved from http://ijecm.co.uk/
Alifani, G. A., & Nugroho, A. B. (2013). Proving Modigliani and Miller theories of capital structure: the research on Indonesian cigarette companies. International journal of economic sciences.
Black (2010). Business Statistics; Contemporary Decision Making 6th edition, John Wiley & Sons.
Bose, C. (2010). Fundamentals of Financial Management (2nd ed.). New Delhi, India: Asoke K. Ghosh, PHI Learning Private Limited.
Breuer, W., & Gürtler, M. (2008). 50 years after M & M: recent developments in corporate finance. Journal of Business economics (Special Issue 6/2008 edition).
Brigham, E. F., & Ehrhardt, M. C. (2010). Financial Management: Theory and practice. Cengage South Western.
Chinwendu, E. J. (2012). Effectiveness of taxation as an instrument for control of money in circulation, University of Nigeria, Nsukka.
Chartered Institute of management Accountant (2002). Examination Study Pack in Financial Management, (45-164) Cape Town, South Africa.
Dangote Sugar Refinery plc (2019). Annual report and statement of account, Retrieved from http://www.nse.org.ng
Devereux, M. P., & Griffith, R. (2003). Evaluating Tax Policy for Location Decisions. International Tax and Public Finance, 10(2), 107–26.
eTranzact International PLC (2019) annual report and statement of account, Retrieved from http://www.nse.org.ng
Ezejelue, A. C., & Ihendinihu, J.U. (2006). Personal income taxation in Nigeria. Aba: Llins Consult Nig.
Ezugwu, C. I., & Akubo, D. (2014). Effect of High Corporate Tax Rate on the Liquidity of Corporate Organizations in Nigeria-A Study of Some Selected Corporate Organizations, Global Journal of Management and Business Research: Accounting and Auditing, 14(3).
Hall, Robert E., & Jorgenson, D. W. (1967). Tax Policy and Investment Behavior. American Economic Review, 57(3), 391–414.
Hermes, N., Smid, P., & Yao, L. (2007). Capital Budgeting Practices: A Comparative Study of the Netherlands and China. International business review, 16(5), 630-654.
Hormats, D. R. (2010). Importance of Investment in Global Economy. World Investment Forum Xiamen, China, under Secretary for Economic, Energy and Agricultural Affairs. September 6, 2010. Retrieved from http/www.state.gov/e/rls/rmk/2010/146894.htm.
Julius Berger Nigeria PLC (2019). annual report and statement of account, Retrieved from http://www.nse.org.ng
Kamwine N. M., Mbabazi M., & Jaya, S. (2015). The effect of capital budgeting investment decision on organizational performance in rwanda. International Journal of Small Business and Entrepreneurship Research, 3(5), 100-132, September 2015. Retrieved from http://www.eajournals.org.
Kaplan Financial Knowledge Bank (2012). http://kfknowledgebank.kaplan.co.uk/. Found at http://kfknowledgebank.kaplan.co.uk/KFKB/Wiki%20Pages/Theories%20of%20Gearing.aspx?mode=none
Kombo, D. K., & Tromp, D. L. A. (2006). Proposal and Thesis Writing. Pauline Publications Africa, Kenya.
Maydew, E. L., & Shackelford, D. A. (2005). The changing role of auditors in corporate tax planning. Working Paper 11504, National Bureau of Economic Research, http://www.nber.org/papers/w11504
Mayo, H. B. (2000). Investment: An Introduction 6th Edition, New Jersey: Harcourt College Publishers
Miller, M. H., & Modigliani, F. (1961). Dividend policy, growth and the valuation of shares. The Journal of Business, 411-433.
Modigliani, F., & Miller, M. H. (1958). The cost of capital, corporation finance and the theory of investment. The American Economic Review, 261-296.
Modigliani, F., & Miller, M. H. (1963). Corporate income taxes and the cost of capital: a correction. The American Economic Review, 433-443.
Morein, T. (2008). Common tax planning strategies explained: A holistic approach to tax efficient wealth building. (Retrieved at http://www.travismorien.com on 14th February, 2016.)
Okon, E. (1997). Company Income Tax In Nigeria (unpublished Monograph) University of Port Harcourt.
Oloidi, G. A. (2014). Company Income Tax and Investment Decisions: A Behavioural Approach. IOSR Journal of Business and Management (IOSR-JBM), 16(7) (July. 2014) retrieved from http://www.iosrjournals.org
OECD. (2012). OECD employment outlook., Retrieved from http://www.upf.edu/materials/bib/ docs/3334/employ/employ12.pdf
Pan, J. (2012). Evaluating theories of capital structure in different financial systems: an empirical analysis. Venezia: Universita Ca'foscari.
Pandey, I. M. (2003) Financial Management, New Delhi: Vikas Publishing House Ltd.
Popescu, L., & Sorin, V. (2011, April 20). Retrieved from http://steconomice.uoradea.ro/. Found at http://steconomice.uoradea.ro/anale/volume/2009/v3-finances-banks-and-account ancy/53.pdf
Scholes, M. S., & Wolfson, M. A. (1992). Taxes and Business Strategy: A Planning Approach. New Jersey: Prentice Hall.
Scholes, M. S., Wolfson, M. A., Erickson, M., Maydew, E. L., & Shevlin, T. (2009). Taxes and Business Strategy: A Planning Approach, (4th ed.). Upper Saddle River: Pearson Prentice Hall.
SPSS (2021). IBM SPSS v20 Output, Researchers statistical computation and interpretation.
NSE (2021). Annual report and statement of account of listed companies in Nigeria.
Tijani-Alawe (2002). Contemporary Lessons in African Philosophy of Business. Abribas Experience in Maternally Moderated Aggressive Fatalism International. Journal of Social and Policy Issues, 1(1), 59-66.
Total Nigerian plc (2019). annual report and statement of account, Retrieved from http://www.nse. +99999org.ng
Villamil, A. P. (2000). The Modigliani-Miller Theorem. The New Palgrave Dictionary of Economics, 1-7.
Wahab, N. S., & Holland, K. (2012). Tax planning, corporate governance and equity value. The British Accounting Review, 44, 111-124. http://dx.doi.org/10.1016/j.bar.2012.03.005
Zenith International bank Nigerian plc (2013 -2017). annual report and statement of account, Retrieved from http://www.nse.org.ng
Harrington, A. (2005). Modern Social Theory. 1-13.
Harris, A. L., Lang, M., Yates, D., & Kruck, S. E. (2008). Incorporating Ethics and Social Responsibility in IS Education. Journal of Information Systems Education, 22(3), 183-189.
Harun, R., Hock, L. K., & Othman, F. (2011). Environmental Knowledge and Attitude among Students in Sabah. World Applied Sciences Journal, 14, 83-87.
Published
2021-12-01
How to Cite
HARUNA, Muniru. The Impact Analysis of Investment Decisions on Taxations of Corporate Organisations: An Empirical Studies from Nigeria. Asian Journal of Research in Business and Management, [S.l.], v. 3, n. 4, p. 5-15, dec. 2021. Available at: <https://myjms.mohe.gov.my/index.php/ajrbm/article/view/16320>. Date accessed: 21 may 2022.
Section
Articles