Effect of Tax Planning Strategy on Financial Performance of Listed Deposit Money Banks in Nigeria

• Post by: birpo
• June 25, 2026
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Omulu, Nneka Eunice

Abstract         

Background: Tax planning strategy constitutes a critical corporate financial management tool through which firms legally minimize tax liabilities to enhance profitability and shareholder value. In the Nigerian banking sector, where corporate income tax rates impose substantial fiscal burdens, deposit money banks deploy various tax planning mechanisms, including effective tax rate optimization, debt tax shields, thin capitalization strategies, and capital intensity management, to improve financial performance. Despite growing scholarly interest in corporate tax planning in Nigeria, the empirical literature on the specific effects of these strategies on the return on assets (ROA) of listed deposit money banks remains fragmented and methodologically inconsistent. Objectives: This study examined the effect of tax planning strategy on the financial performance of listed deposit money banks in Nigeria, specifically investigating the effects of effective tax rate, debt tax shield, thin capitalization, and capital intensity on return on assets. Method: An ex-post facto longitudinal panel data design was adopted. Secondary data were extracted from the audited annual reports and financial statements of 22 listed deposit money banks on the Nigerian Exchange Group (NGX) from 2013 to 2023, yielding 220 bank-year observations. Data were analyzed using panel generalized least squares (GLS) with cross-sectional SUR correction following confirmation of heteroskedasticity and autocorrelation. Pre-estimation tests including unit root (LLC and ADF Fisher), Hausman specification test, Pearson correlation, and VIF analysis were conducted. Results: Effective tax rate had a significant negative effect on ROA (β = −0.312, p < 0.05); debt tax shield had a significant positive effect on ROA (β = 0.287, p < 0.05); thin capitalization had a significant negative effect on ROA (β = −0.198, p < 0.05); and capital intensity had a significant negative effect on ROA (β = −0.174, p < 0.05). Conclusion: Tax planning strategies significantly determine the financial performance of Nigerian listed deposit money banks.

Keywords: Tax planning, effective tax rate, debt tax shield, thin capitalization, capital intensity, return on assets, deposit money banksCite: Omulu, N. E.(2026). Effect of Tax Planning Strategy on Financial Performance of Listed Deposit Money Banks in Nigeria. International Journal of Accounting Research and Financial Insights,4(4), 326-339.https://doi.org/10.5281/zenodo.20817551