Tax Planning and Capital Budgeting Decision of Listed Manufacturing Companies in Nigeria

Abstract

Inadequate capital is a major factor bedeviling economic development in Nigeria and the world at large. Capital budgeting decision is sine-qua- non to the growth and expansion of business and must be premised on efficient tax planning to forestall distortionary effect on the economy. This work intends to examine the effect of tax planning on capital budgeting decision of listed companies in Nigeria. Expost-facto design was adopted and a sample of 27 companies was selected from the entire population of 54 companies using purposive and quota sampling techniques. Financial statements of selected listed companies were analyzed using multiple regression. Findings revealed that tax planning has significant positive effect on capital budgeting decision in listed manufacturing companies in Nigeria(Adj.R² = 0.7734, Wald-Stat = 2620.89, p Ë‚ 0.05).  Likewise, Financial leverage has significant moderating effect on tax planning and capital budgeting decision in listed manufacturing companies in Nigeria (Adj.R² = 0.7739, Wald-Stat = 2664.28, pË‚ 0.05). It was concluded that tax planning has significant effect on capital budgeting decision and financial leverage has significant moderating effect on tax planning and capital budgeting decision. The study recommended that management of listed companies should engage in lawful tax planning for better capital budgeting decision. Financial leverage should also be considered by the management of listed companies in capital budgeting decision to avoid the erosion of perceived benefit of tax planning.