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Scirj, Volume VI [2018]
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Scirj Volume VI, Issue VIII, August 2018 Edition
ISSN: 2201-2796

Effect of Taxation on Dynamic Capital Structure Decisions of Quoted Industrial Firms in Nigeria

ORJINTA, HOPE IFEOMA; PROF. IFURUEZE, MESHACK S.

Abstract: The study investigated the effect of taxation on dynamic capital structure financing decisions of quoted industrial firms in Nigeria, using panel data collected from the annual report of the above mentioned companies within the period of fifteen years spanning 2003-2017. The study used longitudinal and ex-post facto research design. The sampled data was analyzed using simple regression tools. The study decomposed the different tax components into individual tax level and corporate tax level. The analysis of the result showed a significant positive relationship between company income tax and capital structure financing using dynamic model approach. The result revealed positive significant relationship between interest tax, tax shield and the companies equity ratio. In principle, the results support the view that capital structure financing choices are significantly affected by taxation both at individual and corporate level. Based on the result of the analysis and its findings, the study recommends among others that in making capital structure financing decisions, firms should consider the effect of taxes at both the individual level and company level. Industrial firms should also optimize the mix of debt financing in order to enjoy the associated benefits in terms of increase in tax shield.

Reference this Paper: Effect of Taxation on Dynamic Capital Structure Decisions of Quoted Industrial Firms in Nigeria by ORJINTA, HOPE IFEOMA; PROF. IFURUEZE, MESHACK S. published at: "Scientific Research Journal (Scirj), Volume VI, Issue VIII, August 2018 Edition, Page 35-49 ".

Search Terms: Equity/debt financing, interest tax, company tax, tax shield and dividend tax

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