Corporate Taxation and Dividend Policy Decision: Evidence from Nigeria Deposit Money Banks

JONAH Ngbomowa Moses PhD; AARON Clinton Chika; JACK Obiazi Tubotamuno-Ojas PhD

doi:10.56201/ijefm.v10.no7.2025.pg68.81

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Corporate Taxation and Dividend Policy Decision: Evidence from Nigeria Deposit Money Banks

JONAH Ngbomowa Moses PhD, AARON Clinton Chika, JACK Obiazi Tubotamuno-Ojas PhD

Abstract

This study investigates the impact of corporate taxation on dividend policy decisions among Deposit Money Banks (DMBs) listed on the Nigerian Exchange Group. Specifically, it examines how tax incentives and exemptions, tax compliance cost, and tax planning and avoidance affect dividend per share (DPS) and dividend pay-out ratio (DPR). Motivated by the regulatory complexities and increasing tax pressures in Nigeria’s financial sector, the study adopts an ex post facto research design and analyses panel data from 10 listed banks covering the period 2013 to 2023. Secondary data were sourced from audited annual reports and analysed using descriptive statistics, correlation analysis, and panel regression models. Findings reveal that tax incentives and exemptions exert a positive and statistically significant influence on dividend policy, indicating that reliefs and exemptions enable banks to pay higher dividends. Conversely, tax compliance cost and effective tax rate (used as a proxy for tax planning and avoidance) show significant negative effects on both DPS and DPR, suggesting that administrative tax burdens and inefficient tax planning reduce the capacity for profit distribution. The results highlight corporate taxation as a major strategic determinant of dividend decisions in the Nigerian banking industry. The study concludes that reforms in tax policy particularly those aimed at reducing compliance burdens and enhancing legitimate tax planning could encourage more robust and consistent dividend payments among banks. It recommends the expansion of tax incentives for dividend- paying firms, simplification of compliance procedures, and greater alignment of tax policy with corporate governance and investor expectations. These findings provide empirical guidance for policymakers, tax administrators, corporate executives, and financial analysts in shaping a more investor-friendly fiscal environment in Nigeria.

Keywords

Corporate TaxationTax IncentivesTax Compliance CostTax PlanningDividend

References

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Corporate Taxation and Dividend Policy Decision: Evidence from Nigeria Deposit Money Banks

Abstract

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