Tax planning and shareholder wealth maximization among listed banks in Nigeria

https://doi.org/10.35912/ijfam.v7i1.2756
Published: Jun 26, 2025

Abstract:

Purpose: This study examines the nexus between tax planning and shareholder wealth maximization among listed banks in Nigeria. The specific objective was to estimate the extent to which the effective tax rate affects the total shareholder return.

Method: An ex-post facto research design was adopted on a population of 12 listed deposit money banks in Nigeria. Purposive sampling was used to select a sample size of nine banks. Secondary data for the study were sourced from the annual reports of banks from 2014 to 2023. Cross-sectional, seemingly unrelated regression was carried out to test this hypothesis.

Results: It was found that a reduction in the effective tax rate will increase the total shareholder return of listed banks in Nigeria (? = -0.171827, p = 0.0000).

Conclusions: Tax planning enables companies to strategically manage their tax liabilities by minimizing tax expenses by taking advantage of available deductions, credits, and exemptions. As per policy implications, Nigerian tax authorities should continuously assess tax liabilities and implement legal tax minimization strategies.

Limitations: This study is limited by its focus on listed deposit money banks in Nigeria, which restricts the generalizability of the findings to other financial institutions.

Contribution: This study contributes to the literature by filling a critical gap by focusing on sector-specific profitability metrics, as it offers a new perspective on the liquidity-performance relationship in Nigerian agricultural firms.

Keywords:
1. Effective Tax Rate
2. Shareholder Wealth Maximization
3. Tax Planning
4. Total Shareholder Return
Authors:
1 . Peter-Mario Efesiri Efenyumi
Michael and Cecilia Ibru University, Agbarha-Otor, Delta State – Nigeria
2 . Gilbert Ogechukwu Nworie
Ebonyi State University, Abakaliki, Ebonyi State, Nigeria
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Efenyumi, P.-M. E., & Nworie, G. O. (2025). Tax planning and shareholder wealth maximization among listed banks in Nigeria. International Journal of Financial, Accounting, and Management, 7(1), 91–104. https://doi.org/10.35912/ijfam.v7i1.2756
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Vol. 7 No. 1 (2025): June
Articles
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References

    References

    Adejumo, B. T., & Sanyaolu, W. A. (2020). Tax Planning and Profitability of Nigerian Deposit Money Banks: Evidence from Dynamic Panel Model. Accounting and taxation review, 4(2), 162-169.

    Ado, R., & Tanko, U. M. (2024). Effect of Real Earnings Management on Tax Planning of Listed Manufacturing Firms in Nigeria. International Journal of Financial, Accounting, and Management, 6(2), 231-243. doi:https://doi.org/10.35912/ijfam.v6i2.2100

    Agboola, M. O. (2024). Corporate Tax Planning and Financial Performance of Listed Manufacturing Companies in Nigeria. International Journal of Accounting, Finance and Administrative Research, 1(4), 1-19.

    Anaike, C., Nworie, G. O., & Ochuka, C. E. (2024). Corporate Citizenship and Wealth Maximisation: A Re-evaluation of Stakeholder Theory Using Evidence from Listed Industrial Goods Firms in Nigeria. Asian Journal of Economics, Business and Accounting, 24(8), 262-273. doi:https://doi.org/10.2139/ssrn.4918948

    Aondoakaa, K., Iortima, T., & Achika, C. T. (2021). Tax Planning and Firm Value: Evidence from Financial Services Companies Listed in Nigeria. Journal of Accounting, Business and Social Sciences.

    Burgman, R. J., & Van Clieaf, M. (2012). Total Shareholder Return (TSR) and Management Performance: A Performance Metric Appropriately Used, Or Mostly Abused? Rotman International Journal of Pension Management, 5(2). doi:https://dx.doi.org/10.2139/ssrn.2147777

    Bwala, I. F., Ibrahim, M., & Gurama, Z. u. (2024). Tax Planning and the Value of Listed Commercial Banks in Nigeria. International Journal of Intellectual Discourse, 7(1), 167-180.

    Chudik, A., & Pesaran, H. (2015). Large Panel Data Models With Cross-Sectional Dependence: A Survey. doi:https://doi.org/10.1093/oxfordhb/9780199940042.013.0001

    Connelly, B. L., Certo, S. T., Ireland, R. D., & Reutzel, C. R. (2011). Signaling Theory: A Review and Assessment. Journal of management, 37(1), 39-67. doi:https://doi.org/10.1177/0149206310388419

    de Oliveira, N. A., & Basso, L. F. C. (2024). The Impact of Value Creation (Tobin’s Q), Total Shareholder Return (TSR), and Survival (Altman’s Z) on Credit Ratings. International Journal of Financial Studies, 12(2), 44. doi:https://doi.org/10.3390/ijfs12020044

    Diputra, V. D. C., & Rikumahu, B. (2024). Stock Valuation Before and After The COVID-19 Pandemic: Free Cash Flow to Firm (FCFF) and Relative Valuation Approach With Discounted Cash Flow (DCF) Valuation Method. Journal of Multidisciplinary Academic Business Studies, 1(4), 505-524. doi:https://doi.org/10.35912/jomabs.v1i4.2231

    Eche, G., Gimba, J. T., & Vincent, H. S. (2024). Corporate Tax Planning and Financial Performance of Listed Deposit Money Banks in Nigeria. AFIT Journal of Marketing Research, 3(1).

    Edeh, I. T., Nwoha, C. E., & Okoro, C. O. (2024). Financing Decisions and Shareholders' Value Creation of Consumer Goods Manufacturing Companies in Nigeria. SADI International Journal of Management and Accounting, 11(2), 1-18. doi:https://doi.org/10.5281/zenodo.10912469

    Erasmus, E. G., & Uwikor, M. K. (2021). Tax Planning Strategies and Financial Performance of Quoted Banks in Nigeria. Journal of Accounting and Financial Management, 7(5), 60-79.

    Fagbemi, T. O., Kolawole, M. A., Adigbole, E. A., & Abogun, S. (2022). C-Suite Bias, Firm Characteristics, and Capital Structure Decisions of Quoted Industrial Firms in Nigeria. Colombo Business Journal, 13(2). doi:https://doi.org/10.4038/cbj.v13i2.123

    Habila, H., Jim-Suleiman, S. L., & Uchendu, E. (2024). Effect of Tax Liabilities on Financial Performance of Listed Deposit Money Banks in Nigeria. Journal of Business Development and Management Research.

    James, O. O., Akanbi, O. O., & Olaronke, O. O. (2020). The Effect of Banks’corporate Tax on the Values of Shareholders’wealth in Nigeria. Editorial Board, 135.

    Kerry, W. (2020). Using the Market Value of Equity to Signal Banking Sector Vulnerabilities. Journal of Risk Management in Financial Institutions, 13(2), 135-144. doi:https://doi.org/10.69554/umwm1030

    Kusumawati, F. R. (2020). Profitability Determinants of Five-Star Hotels in Yogyakarta. Annals of Management and Organization Research, 2(1), 41-52. doi:https://doi.org/10.35912/amor.v2i1.670

    Liviani, R., & Rachman, Y. T. (2021). The Influence of Leverage, Sales Growth, and Dividend Policy on Company Value. International Journal of Financial, Accounting, and Management, 3(2), 165-178. doi:https://doi.org/10.35912/ijfam.v3i2.189

    LoPucki, L. M. (2022). The End of Shareholder Wealth Maximization. UC Davis L. Rev., 56, 2017.

    Maharana, A. K., & Panda, P. (2025). Exploring the Relationship Between Tax Planning and Firm Performance: A Meta-Analysis Approach. Thailand and The World Economy, 43(1), 106-116.

    Muhammad, S. (2019). Tax Planning and Shareholder’s Wealth Maximization: Evidence From Listed Deposit Money Banks in Nigeria. Lasu Journal of Accounting and Finance, 4(1), 1-178.

    Nwankwo, S. A., Nwachukwu, C. M., Okegbe, T. O., & Moneke, G. N. (2024). Impact of Tax Planning and Financial Performance of Quoted Deposit Money Bank. Int'l Journal of Education Research and Scientific Development, 5(3), 1-18. doi:https://doi.org/10.59795/ijersd.v5i3.88

    Nworie, G. O., & Mba, C. J. (2022). Modelling Financial Performance of Food and Beverages Companies Listed on Nigerian Exchange Group: The Firm Characteristics Effect. Journal of Global Accounting, 8(3), 37-52.

    Nworie, G. O., Oduche, I. J., & Cyril-Nwuche, O. F. (2024). Signaling Theory in Action: How Dividends Affect Shareholder Investment Decisions in Nigerian Deposit Money Banks. Asian Journal of Economics, Business and Accounting, 24(7), 506-515. doi:https://doi.org/10.9734/ajeba/2024/v24i71426

    Nworie, G. O., & Ofoje, B. C. (2022). Liquidity As an Antecedent to the Financial Performance of Listed Food and Beverages Firms in Nigeria. International Journal of Advances in Engineering and Management, 4(12), 192-200. doi:https://doi.org/10.35629/5252-0412192200

    Nworie, G. O., Okafor, T. G., & John-Akamelu, C. R. (2022). Firm-Level Traits and the Adoption of Computerised Accounting Information System Among Listed Manufacturing Firms in Nigeria. Journal of Global Accounting, 8(3), 128-148.

    Oranefo, P., & Egbunike, C. (2022). Debt Financing and Firm Valuation of Quoted Non-Financial Firms in Nigeria Stock Exchange. International Journal of Financial, Accounting, and Management, 4(2), 199-218.

    Osho, A. E., & Orisamika, O. (2022). Tax Variances and Financial Performance of Deposit Money Banks Multinational Companies in Nigeria. Journal of Accounting and Financial Management, 8(7), 208-224. doi:https://doi.org/10.56201/jafm.v8.no7.2022.pg208.224

    Sarafidis, V., & Wansbeek, T. (2012). Cross-Sectional Dependence in Panel Data Analysis. Econometric Reviews, 31(5), 483-531. doi:https://doi.org/10.1080/07474938.2011.611458

    Yasar, B., Martin, T., & Kiessling, T. (2020). An Empirical Test of Signalling Theory. Management Research Review, 43(11), 1309-1335. doi:https://doi.org/10.1108/MRR-08-2019-0338

  1. References
  2. Adejumo, B. T., & Sanyaolu, W. A. (2020). Tax Planning and Profitability of Nigerian Deposit Money Banks: Evidence from Dynamic Panel Model. Accounting and taxation review, 4(2), 162-169.
  3. Ado, R., & Tanko, U. M. (2024). Effect of Real Earnings Management on Tax Planning of Listed Manufacturing Firms in Nigeria. International Journal of Financial, Accounting, and Management, 6(2), 231-243. doi:https://doi.org/10.35912/ijfam.v6i2.2100
  4. Agboola, M. O. (2024). Corporate Tax Planning and Financial Performance of Listed Manufacturing Companies in Nigeria. International Journal of Accounting, Finance and Administrative Research, 1(4), 1-19.
  5. Anaike, C., Nworie, G. O., & Ochuka, C. E. (2024). Corporate Citizenship and Wealth Maximisation: A Re-evaluation of Stakeholder Theory Using Evidence from Listed Industrial Goods Firms in Nigeria. Asian Journal of Economics, Business and Accounting, 24(8), 262-273. doi:https://doi.org/10.2139/ssrn.4918948
  6. Aondoakaa, K., Iortima, T., & Achika, C. T. (2021). Tax Planning and Firm Value: Evidence from Financial Services Companies Listed in Nigeria. Journal of Accounting, Business and Social Sciences.
  7. Burgman, R. J., & Van Clieaf, M. (2012). Total Shareholder Return (TSR) and Management Performance: A Performance Metric Appropriately Used, Or Mostly Abused? Rotman International Journal of Pension Management, 5(2). doi:https://dx.doi.org/10.2139/ssrn.2147777
  8. Bwala, I. F., Ibrahim, M., & Gurama, Z. u. (2024). Tax Planning and the Value of Listed Commercial Banks in Nigeria. International Journal of Intellectual Discourse, 7(1), 167-180.
  9. Chudik, A., & Pesaran, H. (2015). Large Panel Data Models With Cross-Sectional Dependence: A Survey. doi:https://doi.org/10.1093/oxfordhb/9780199940042.013.0001
  10. Connelly, B. L., Certo, S. T., Ireland, R. D., & Reutzel, C. R. (2011). Signaling Theory: A Review and Assessment. Journal of management, 37(1), 39-67. doi:https://doi.org/10.1177/0149206310388419
  11. de Oliveira, N. A., & Basso, L. F. C. (2024). The Impact of Value Creation (Tobin’s Q), Total Shareholder Return (TSR), and Survival (Altman’s Z) on Credit Ratings. International Journal of Financial Studies, 12(2), 44. doi:https://doi.org/10.3390/ijfs12020044
  12. Diputra, V. D. C., & Rikumahu, B. (2024). Stock Valuation Before and After The COVID-19 Pandemic: Free Cash Flow to Firm (FCFF) and Relative Valuation Approach With Discounted Cash Flow (DCF) Valuation Method. Journal of Multidisciplinary Academic Business Studies, 1(4), 505-524. doi:https://doi.org/10.35912/jomabs.v1i4.2231
  13. Eche, G., Gimba, J. T., & Vincent, H. S. (2024). Corporate Tax Planning and Financial Performance of Listed Deposit Money Banks in Nigeria. AFIT Journal of Marketing Research, 3(1).
  14. Edeh, I. T., Nwoha, C. E., & Okoro, C. O. (2024). Financing Decisions and Shareholders' Value Creation of Consumer Goods Manufacturing Companies in Nigeria. SADI International Journal of Management and Accounting, 11(2), 1-18. doi:https://doi.org/10.5281/zenodo.10912469
  15. Erasmus, E. G., & Uwikor, M. K. (2021). Tax Planning Strategies and Financial Performance of Quoted Banks in Nigeria. Journal of Accounting and Financial Management, 7(5), 60-79.
  16. Fagbemi, T. O., Kolawole, M. A., Adigbole, E. A., & Abogun, S. (2022). C-Suite Bias, Firm Characteristics, and Capital Structure Decisions of Quoted Industrial Firms in Nigeria. Colombo Business Journal, 13(2). doi:https://doi.org/10.4038/cbj.v13i2.123
  17. Habila, H., Jim-Suleiman, S. L., & Uchendu, E. (2024). Effect of Tax Liabilities on Financial Performance of Listed Deposit Money Banks in Nigeria. Journal of Business Development and Management Research.
  18. James, O. O., Akanbi, O. O., & Olaronke, O. O. (2020). The Effect of Banks’corporate Tax on the Values of Shareholders’wealth in Nigeria. Editorial Board, 135.
  19. Kerry, W. (2020). Using the Market Value of Equity to Signal Banking Sector Vulnerabilities. Journal of Risk Management in Financial Institutions, 13(2), 135-144. doi:https://doi.org/10.69554/umwm1030
  20. Kusumawati, F. R. (2020). Profitability Determinants of Five-Star Hotels in Yogyakarta. Annals of Management and Organization Research, 2(1), 41-52. doi:https://doi.org/10.35912/amor.v2i1.670
  21. Liviani, R., & Rachman, Y. T. (2021). The Influence of Leverage, Sales Growth, and Dividend Policy on Company Value. International Journal of Financial, Accounting, and Management, 3(2), 165-178. doi:https://doi.org/10.35912/ijfam.v3i2.189
  22. LoPucki, L. M. (2022). The End of Shareholder Wealth Maximization. UC Davis L. Rev., 56, 2017.
  23. Maharana, A. K., & Panda, P. (2025). Exploring the Relationship Between Tax Planning and Firm Performance: A Meta-Analysis Approach. Thailand and The World Economy, 43(1), 106-116.
  24. Muhammad, S. (2019). Tax Planning and Shareholder’s Wealth Maximization: Evidence From Listed Deposit Money Banks in Nigeria. Lasu Journal of Accounting and Finance, 4(1), 1-178.
  25. Nwankwo, S. A., Nwachukwu, C. M., Okegbe, T. O., & Moneke, G. N. (2024). Impact of Tax Planning and Financial Performance of Quoted Deposit Money Bank. Int'l Journal of Education Research and Scientific Development, 5(3), 1-18. doi:https://doi.org/10.59795/ijersd.v5i3.88
  26. Nworie, G. O., & Mba, C. J. (2022). Modelling Financial Performance of Food and Beverages Companies Listed on Nigerian Exchange Group: The Firm Characteristics Effect. Journal of Global Accounting, 8(3), 37-52.
  27. Nworie, G. O., Oduche, I. J., & Cyril-Nwuche, O. F. (2024). Signaling Theory in Action: How Dividends Affect Shareholder Investment Decisions in Nigerian Deposit Money Banks. Asian Journal of Economics, Business and Accounting, 24(7), 506-515. doi:https://doi.org/10.9734/ajeba/2024/v24i71426
  28. Nworie, G. O., & Ofoje, B. C. (2022). Liquidity As an Antecedent to the Financial Performance of Listed Food and Beverages Firms in Nigeria. International Journal of Advances in Engineering and Management, 4(12), 192-200. doi:https://doi.org/10.35629/5252-0412192200
  29. Nworie, G. O., Okafor, T. G., & John-Akamelu, C. R. (2022). Firm-Level Traits and the Adoption of Computerised Accounting Information System Among Listed Manufacturing Firms in Nigeria. Journal of Global Accounting, 8(3), 128-148.
  30. Oranefo, P., & Egbunike, C. (2022). Debt Financing and Firm Valuation of Quoted Non-Financial Firms in Nigeria Stock Exchange. International Journal of Financial, Accounting, and Management, 4(2), 199-218.
  31. Osho, A. E., & Orisamika, O. (2022). Tax Variances and Financial Performance of Deposit Money Banks Multinational Companies in Nigeria. Journal of Accounting and Financial Management, 8(7), 208-224. doi:https://doi.org/10.56201/jafm.v8.no7.2022.pg208.224
  32. Sarafidis, V., & Wansbeek, T. (2012). Cross-Sectional Dependence in Panel Data Analysis. Econometric Reviews, 31(5), 483-531. doi:https://doi.org/10.1080/07474938.2011.611458
  33. Yasar, B., Martin, T., & Kiessling, T. (2020). An Empirical Test of Signalling Theory. Management Research Review, 43(11), 1309-1335. doi:https://doi.org/10.1108/MRR-08-2019-0338