Corporate Tax Shield of Depreciation and Earnings Management of Deposit Money Banks in Nigeria
Dibua, Ekene C and Adebisi, Julius Adedeji
Abstract
This study determined the effect of corporate tax shield of depreciation on earnings management of deposit money banks in Nigeria. Ex Post Facto research design was adopted for the study. Data were extracted from the sampled thirteen banks in Nigeria from 2013 to 2023. Regression analysis was employed to test the hypothesis; the study revealed that depreciation has a significant effect on earnings management of deposit money banks in Nigeria at 5% level of significance. Conclusively, the findings indicated that tax shield of depreciation has significant effect on earning management in Nigeria. Based on the findings, the study recommended that tax authorities should ensure that depreciation to be deducted must be associated with an asset used in a business or income-generating activity, and have an expected lifespan of more than one year.
Keywords
Corporate tax shield
Depreciation and Earnings management
References
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management in Nigeria commercial banks. African Journal of Business and Economic
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Okerekeoti, C. U. (2022) Effect of firm complexity on effective tax rate of quoted consumer
goods manufacturing firms in Nigeria, International Journal of Research in Education
and Sustainable Development 2(5); 1-12.
Paiva, I. C. & Lourenco, I. (2013). The effect of size on the level of earnings management in
family firms. Available at SSRN 2286757.
Prabowo, M. A., Winarna, J., Aryani, Y. A., Falikhatun, & Gantyowati, E. (2020). The level of
debt and earnings management in Indonesia: An issue offree cash-flow or covenant?
Jurnal Keuangan dan Perbankan, 24(2), 142-55.
Setiawati, L., & Na’im, A. (2021). Bank health evaluation by Bank Indonesia and earnings
management in banking industry. Gadjah Mada International Journal
of Business, 3,
159-176.
Stiglitz, J. E. (1986). The general theory of tax avoidance Cambridge. National Bureau of
Economics Research. 4(2), 16-35.
Sundvik, D., (2017a). Book-tax conformity and earnings management in response to tax rate
cuts. Journal of International Accounting, Auditing and Taxation 28: 31–42.
Sundvik, D., (2017b). Tax-induced fiscal year extension and earnings management. Journal of
Applied Accounting Research, 18. 356–374.
Tarek, E. (2017) An empirical investigation of earnings management in the MENA Region. (A
thesis submitted in partial fulfillment of the requirements for the degree of Doctor of
Philosophy University of the West of England).
Uwalomwa, U., Uwuigbe, O. R., Olubukunola, A. & Okorie, B. (2015) Assessment of the effects
of firms’ characteristics on earnings management of listed firms in Nigeria. Asian
Economic and Financial Review, 5(2), 218-228.
Wijaya, M., & Martani, D. (2011). Corporate earnings management practices in responding to
tax tariff reduction in accordance with Law No. 36, Year 2008.
Journal of Finance and Accounting, 6(8), 413-425.
Blessing, N. N. (2020). Tax shield and earnings management in Nigeria banks. International
Journal of Advances in Engineering and Management. 2(12); 798-808.
Bozanic, Z., Hoopes, J. L., Thornock, J. R., & Williams, B. M. (2017). IRS Attention. Journal of
Accounting Research, 55(1), 79–114.
Graham, J. R., Hanlon, M., Shevlin, T., & Shroff, N. (2014). Incentives for tax planning and
avoidance: Evidence from the field. The Accounting Review, 89:991-1023.
Hanlon, M., & Heitzman, S., (2010). A review of tax research. Journal of Accounting and
Economics 50: 127–178.
Harnovinsah, A. & Lisya, C. (2014). The influence of corporate tax rate changes toward earnings
management. International journal of business, economics and law, 5(1) (Dec.) ISSN
2289-1552.
Hidayati. S. M. & Zulaikha V. (2018), Analisis Perilaku Earning Management: Motivasi
Mininialisasi Income Tax, Simposium Nasional Akuntansi VI, Surabaya, 16-17.
Lin, K. Z., Mills, L. F. & Zhang, F., (2014). Public versus private firm responses to the tax rate
reduction in China” The Journal of the American Taxation Association 36: 137–163.
Murray, J. (2019). How tax shields can be used to reduce income tax. Available at
https://www.thebalancesmb.com/how-tax-shields-can-reduce-income-tax-4155788.
Ochuko B. E. (2021). Determinants of earnings management: the study of Nigeria nonfinancial
companies. Ekonomski Horizonti, 23(2), 139 – 155.
Ofurum, D. I., Okoye E. I. & Ezejiofor R. A. (2021). Effect of corporate tax shield on earnings
management in Nigeria commercial banks. African Journal of Business and Economic
Development. 1(12); 1-12.
Okerekeoti, C. U. (2022) Effect of firm complexity on effective tax rate of quoted consumer
goods manufacturing firms in Nigeria, International Journal of Research in Education
and Sustainable Development 2(5); 1-12.
Paiva, I. C. & Lourenco, I. (2013). The effect of size on the level of earnings management in
family firms. Available at SSRN 2286757.
Prabowo, M. A., Winarna, J., Aryani, Y. A., Falikhatun, & Gantyowati, E. (2020). The level of
debt and earnings management in Indonesia: An issue offree cash-flow or covenant?
Jurnal Keuangan dan Perbankan, 24(2), 142-55.
Setiawati, L., & Na’im, A. (2021). Bank health evaluation by Bank Indonesia and earnings
management in banking industry. Gadjah Mada International Journal
of Business, 3,
159-176.
Stiglitz, J. E. (1986). The general theory of tax avoidance Cambridge. National Bureau of
Economics Research. 4(2), 16-35.
Sundvik, D., (2017a). Book-tax conformity and earnings management in response to tax rate
cuts. Journal of International Accounting, Auditing and Taxation 28: 31–42.
Sundvik, D., (2017b). Tax-induced fiscal year extension and earnings management. Journal of
Applied Accounting Research, 18. 356–374.
Tarek, E. (2017) An empirical investigation of earnings management in the MENA Region. (A
thesis submitted in partial fulfillment of the requirements for the degree of Doctor of
Philosophy University of the West of England).
Uwalomwa, U., Uwuigbe, O. R., Olubukunola, A. & Okorie, B. (2015) Assessment of the effects
of firms’ characteristics on earnings management of listed firms in Nigeria. Asian
Economic and Financial Review, 5(2), 218-228.
Wijaya, M., & Martani, D. (2011). Corporate earnings management practices in responding to
tax tariff reduction in accordance with Law No. 36, Year 2008.
