Corporate Taxes and Financing Decisions: Evidence from Quoted Consumer Goods Firms in Nigeria

Odey Jacob; T.A. Ngerebo-a

doi:10.56201/jafm.vol.12.no9.2026.p173.187

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Corporate Taxes and Financing Decisions: Evidence from Quoted Consumer Goods Firms in Nigeria

Odey Jacob, T.A. Ngerebo-a

Abstract

This study examined the effect of corporate taxation on the financing decisions of quoted consumer goods firms in Nigeria. The study was motivated by the increasing importance of corporate taxation in shaping firms' financing choices amidst rising financing costs and changing fiscal policies. An ex post facto research design was adopted using a quantitative panel data approach. Secondary data were obtained from the audited annual financial statements of quoted consumer goods firms in Nigeria. Corporate taxation was proxied by Corporate Income Tax and Effective Tax Rate , while financing decisions were measured using Debt Ratio (DR), Equity Ratio , and Financing Mix . The study estimated Pooled Ordinary Least Squares , Fixed Effects (FE), and Random Effects (RE) models, with the Hausman specification test employed to select the most appropriate estimator for each model. The findings revealed that corporate income tax exerted a significant negative effect on both debt financing and equity financing but had a significant positive effect on financing mix. Similarly, the effective tax rate positively and significantly influenced debt financing and financing mix, whereas its effect on equity financing was not significant. Firm size significantly influenced all financing measures, while firm growth had no significant effect across the estimated models. The study concludes that corporate taxation remains a significant factor influencing the financing decisions of quoted consumer goods firms in Nigeria, although its effects differ across various financing options. The study therefore recommends that corporate managers should adopt balanced financing strategies, complemented by effective tax planning, to optimise their financing choices while ensuring full compliance with prevailing tax regulations.

Keywords

Corporate taxescorporate income taxeffective tax ratefinancing decisionsdebt financingequity financingfinancing mixconsumer goods firmsNigeria.

References

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Corporate Taxes and Financing Decisions: Evidence from Quoted Consumer Goods Firms in Nigeria

Abstract

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