Tax Approximations and Firm Performance: A Study of Listed Financial Firms in Nigeria

Abstract

This study examined the effect of tax estimates on the performance of financial firms in Nigeria. The study specifically sought to explore the extent of the effects of current and deferred taxes on the return on assets (ROA), return on equity (ROE), and earnings per share (EPS) of listed financial firms in Nigeria. Data were collected from the published annual reports of 20 financial firms – 10 banks and 10 insurance companies – from 2013 to 2023, using purposive sampling technique; and these were analyzed using the fixed/random panel regression model. The results showed that current tax has significant positive effects on ROA and ROE but an insignificant positive effect on EPS. In contrast, deferred tax has significant negative effects on both ROA and EPS but an insignificant positive effect on ROE. Consequently, tax estimates strongly influence the financial performance of financial firms in Nigeria. Thus, it was recommended that the management of financial companies should not incur unnecessary costs on tax assessment, as tax liabilities do not have negative effects on their financial performance of firms in the financial sector. More so, managers should give greater preference to deferred tax liabilities than assets in order to ensure better financial performance.

Keywords

• Tax Estimates
• Firm Performance
• Financial Firms
• Nigeria

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