EFFECT OF TAX AGGRESSIVESNESS ON LIQUIDITY MANAGEMENT OF LISTED MANUFACTURING FIRMS IN NIGERIA
Keywords:
Book-tax difference, Cash effective tax rate, Current ratio, Liquidity management, Tax aggressivenessAbstract
The study investigated the effect of tax aggressiveness on liquidity management of listed manufacturing firms in Nigeria. The study uncovers the surprising link between tax aggressiveness and liquidity management that will reshape financial strategies for manufacturing firms. Based on the objectives of the study, three research questions and hypotheses were formulated. The study covers a ten-year period from 2014 to 2023 because this period holds the most recent annual financial statement and tax filings of listed manufacturing firms are publicly available providing sufficient data to analyze trends and effects over time. The specific objective was to determine the effect of book-tax difference on liquidity ratio (current ratio of listed manufacturing firms in Nigeria. The study employed Ex-post facto research design in which secondary data were collected from annual reports and financial statements of five purposively selected manufacturing companies from 2014 to 2023. Panel least square regression was adopted for the analysis using E-views 10 statistical tools. Findings indicate book-tax differences has significant negative effect on current ratio while cash effective tax rate and effective tax rate have positive significant effect on current ratio. Tax aggressiveness undermines liquidity position when aggressively pursued beyond ethical and compliance boundaries. However, legitimate tax planning enhances cashflows and liquidity. The study concluded that tax aggressiveness and liquidity management decisions require prudence, transparency and consideration of stakeholders' interests to ensure sustainable competitiveness and growth. The study recommended among others that listed manufacturing firms should re-evaluate their tax planning strategies and consider prioritizing financial stability and liquidity management over aggressive tax minimization tactics that rely on high book-tax differences. Maintaining stronger liquidity positions will make the firms less vulnerable to short-term financial stresses.
Downloads
Published
Issue
Section
License
Copyright (c) 2024 Journal of Global Accounting
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
Articles submitted to JOGA should not have been published or are currently under review by another Journal. Kindly see the guide for the preparation of the manuscript for details. Successful submission of articles by author(s) for publication clearly implies that the work is not an infringement of any existing copyright warranty as JOGA reserves the right to be indemnified by the author(s) where any breach of such warranty is proven. For ease of dissemination and to ensure proper policing of use, papers and contributions become the legal copyright of JOGA once published unless otherwise agreed.
Permission clearance should be obtained by the author(s) where applicable for the use of any content of interest not originally created by them. This must be done before the submission of the article to JOGA. Failure to do so may lead to a lengthy delay in publication, as JOGA is unable to publish any article which has permissions pending. Thus, the rights JOGA requires are:
- Non-exclusive right to reproduce the material in the article or book chapters.
- Print and electronic rights.
- To use the material for the life of the work (for instance, there should be no time restrictions on the re-use of material).
Where tables, figures or excerpts of more than 250 words are reproduced from another source, it is expected that:
- Author(s) should obtain the necessary written permission in advance from any third-party owner of the copyright for the use in print and electronic formats of any of their text, illustrations, graphics, or other material in their manuscript. Permission must also be cleared for any minor adaptations of any work not originally created by the author(s). The author (s) should not assume that any content freely available on the web is free to use.
- Where the author adapts a significant number of any material, the author(s) must inform the copyright holder of the original work.
- Author obtains any proof of consent statements
- The author must acknowledge figure(s) and content adopted or adapted in work utilizing source(s) and further capture them in the list of references.
