Tax Planning and Working Capital Management Decision of Listed Manufacturing Companies in Nigeria

Abstract

Working capital management is identified as assisting in planning of current assets and liabilities and places control in a way to minimize liquidity risk and avoid overtrading. However, managers and investors hardly bother about the implication of tax planning on its adequacy and efficiency. The objective of this study is to investigate the effect of tax planning on working capital management decision of listed manufacturing companies in Nigeria. The adopted research design was expost-facto research design. The population of the study is the 54 listed manufacturing companies out of which a sample of 27 companies representing 50% was selected using both purposive and quota sampling techniques. Data was obtained from the financial statement of selected companies through multiple regression. It was discovered that tax planning significantly affects working capital management decision in listed manufacturing companies in Nigeria. (Adj.R² = 0.0418, Wald-Stat = 51.75, p Ë‚ 0.05); financial leverage significantly moderates the impact of tax planning on working capital management decision in listed manufacturing companies in Nigeria(Adj.R² = 0.0399, Wald-Stat = 17.09, p Ë‚ 0.05). The recommendations from the study include that management of listed manufacturing companies should ensure working capital adequacy to avoid overtrading and working capital inadequacy; also tax authorities should keep effective tax rate as low as possible because listed firms pay higher tax than the statutory rate.