Effect of Corporate Governance on Tax Aggressiveness of Quoted Manufacturing Firms in Nigeria

Abstract

This study investigated the effect of corporate governance on tax aggressiveness among selected manufacturing firms in Nigeria. More specifically, corporate governance variables such as Board Size (BSIZE), Board Diversity (BDIV), Independent Directors (INDEP) and Proportion of Non-Executive Directors to Executive Directors (NEDED) and tax aggressiveness (effective tax rate: TAG) were employed. The study covered a period of twelve (12) years from 2005-2016; a total of 44 firms with financial statement covering the time period were selected using the random sampling technique. The expo-facto research design was employed to analyze already existing data obtained from the Annual Reports and Accounts of the firms, and the Nigerian Stock Exchange Fact Book. The data obtained were analyzed using the Ordinary Least Square technique with its Best Linear Unbiased Estimate (BLUE) Property. In addition, a regression model was developed to test the combined effects of corporate governance measures on tax aggressiveness of the selected manufacturing firms and the analysis was performed via STATA 13.0. Based on the analysis of data using the fixed effect regression, it was revealed that board size with a value of -0.016 has no significant impact on tax aggressiveness while board diversity with 0.815, independent director with 1.464 and proportion of non-executive directors to executive directors with -1.207 has a significant effect on tax aggressiveness on quoted manufacturing firms in Nigeria. Using the random effect regression model, a similar outcome was gotten. Based on the findings of the study, it was recommended among others that quoted manufacturing firms in Nigeria should pay less attention to the size of their board, but rather focus on the quality and integrity of the members of the board, gender diversity within the board composition should be encouraged as it helps decrease tax aggressiveness.