A Comparative Analysis Of The Impact Of Corporate Taxation On Company’s Reserve and Dividend Policy In Nigeria: 2000-2011

Abstract

This study critically examines the different selected sectors of the Nigerian Stock Market transaction profile to study the impact of corporate taxation on company’s reserves and dividends in Nigeria covering thirty five (35) companies drawn across seven (7) sectors for a period of 12 years (2000-2011). The variables of interest are: Aggregate Cumulative Total Dividend Payment (ACTDPT) dependent variable, and Aggregate Cumulative Total Cooperate Tax (ACTCPT), Aggregate Cumulative Total Earning per Share (ACTEPS) and Aggregate Cumulative Total Retained Earnings Per Share (ACTRES) independent variables. Ordinary Least Squares Estimation (OLSE), Coefficient of Variability (CV), Granger Causality and Autocorrelation Function/Partial Autocorrelation Function (ACF/PACF) were the different tests from E-view 4.1 and Microfit 4.0 models used to evaluate the sectoral data to determine the comparative impact. The empirical results from the OLS revealed varying degree of directional and magnitude response from ACTCPT, ACTRES, and ACTEPS to the ACTDPT for the seven sectors. The measure of dispersion using coefficient of variability approach shows that by virtual of performance ranking of the sectors, banking has the highest performance of sectors in terms of dividend policy and its impact on corporate taxation on company’s reserve in the last decade, followed by the banking, breweries petroleum and marketing, conglomerates, insurance, construction and allied, and food and beverages. The findings from the Granger Causality effect shows that there is no causality effect, no runs relationship, neither short run or long run and it is not significant at all. This implies that the implementation of corporate tax in Nigeria does not affect the payment policy among the various quoted companies under the stock exchange. Findings recommend implementation of ongoing restructuring policy on the sectors performance so as to increase the Aggregate Cumulative Total Cooperate Tax (ACTCPT), Aggregate Cumulative Total Earning Per Share (ACTEPS) and Aggregate Cumulative Total Return Earning Per Share (ACTRES) thereby improving the Aggregate Cumulative Total Dividend Payment Policy (ACTDPT) in Nigeria among the identified non performing sectors.

Keywords: Cumulative, Sectors, Performance, CV, Dividend Policy, significant, Cumulative