Tax Planning, Corporate Tax Avoidance and Real Earnings Management: GMM Approach in Nigeria
DOI:
https://doi.org/10.12775/CJFA.2023.022Keywords
tax planning, corporate tax avoidance, listed non-financial firms, real earnings management, Nigeria, GMMAbstract
The study examines the effect of tax planning and corporate tax avoidance on Real Earnings Management (REM) in Nigeria. Data were gathered from the financial reports of 58 listed non-financial firms for twelve years, from 2010 to 2021. Preliminary analyses such as descriptive statistics, correlation matrix, and variance inflation factor were conducted. The Generalized Method of Moments (GMM) was employed to identify a possible effect on REM. The study revealed that tax planning has a positive and significant effect on REM, while corporate tax avoidance has a negative and significant influence on REM. Also, leverage revealed a negative significant effect on REM, while firm growth has no significant effect on REM. However, firm size has a significant positive influence on REM. The study concludes that tax planning and corporate tax avoidance have a significant influence on REM. Thus, the study recommends that tax authorities should ensure that firm management engages in lowering capitalization limits, ensures first-in, first-out instead of last-in, reduces nonobligatory expenses for short periods, and ensures moderate deferred tax expenses in order to reduce REM through tax planning.
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