Capital Structure and Tax Planning of Listed Industrial Goods Firms in Nigeria

Abstract

Capital structure remains a central issue in corporate finance, particularly for capitalintensive sectors like industrial goods, where financing decisions significantly influence a firm’s tax planning strategy. This study examined the effect of capital structure on tax planning of listed manufacturing firms in Nigeria, with a focus on the moderating role of firm size. The central problem addressed in this study was the limited empirical evidence on how specific financing instruments affect tax planning behavior, particularly in the Nigerian industrial goods sector. The main objective was to examined how the various components of capital structure affect tax planning and how firm size moderates these relationships. The study was anchored on trade of theory. An ex-post facto research design was adopted, relying on secondary data sourced from the published annual reports of listed firms and the Nigerian Exchange Group between 2014 and 2023. The population comprised 13 listed industrial goods firms, from which 11 were purposively selected based on consistent listing throughout the study period. Data analysis was conducted using panel least squares regression with STATA 17. The decision rule was based on a 5 per cent significance level (p < 0.05). Findings revealed that preferred stock had significant positive effects on capital intensity, while common stock and debentures showed no significant effect. Firm size significantly moderated the relationships for preferred stock. The study concluded that capital structure decisions are more effective when firm size is considered. Recommendations include increased use of preferred stock and factoring in firm size in capital structure decisions to improve tax planning outcomes.