Exploring the Relationship Between Tax Planning and Firm Performance: A Meta- Analysis Approach

Arjuna Kumar Maharana; Priyabrata Panda

Authors

Arjuna Kumar Maharana School of Commerce, Gangadhar Meher University, Odisha, India.
Priyabrata Panda Gangadhar Meher University, Odisha, India

Keywords:

tax planning, firm performance, meta-analysis

Abstract

The paper aims to analyse the relationship between tax planning and firm performance using meta-analysis. A total of 13 papers from the Scopus and Google Scholar databases, comprising a sample of 3254, have been collected and analysed. The analysis has been done with the help of Jamovi software. We found that tax planning has an impact on firms’ financial performance, but such an effect is low. So, in addition to tax planning, firms should focus on other aspects to improve their performance. We have also applied meta-regression, which shows that firm age is a significant moderator of the relationship between tax planning and firm performance. At the same time, leverage is significant at 10% with a high R square. However, Firm size is found to be an insignificant moderator. This finding suggests that new firms should give more effort to tax planning, as the efficiency of tax planning in improving the performance of a firm increases with age and leverage should be given more importance while making tax planning for all firms. This study is the first of its kind to investigate such a relationship using meta-analysis, and it will be helpful for academicians and companies in making important decisions.

References

Ado, A. B., Rashid, N., Mustapha, U. A., & Ademola, L. S. (2021). The impact of corporate tax planning on the financial performance of listed companies in Nigeria. International Journal of Economics, Management and Accounting, 29(02), 273–297.

Akintoye, I. R., Adegbie, F. F., & Victory Onyeka-Iheme, C. (2020). Tax planning strategies and profitability of quoted manufacturing companies in Nigeria. Journal of Finance and Accounting, 8(3), 148-157.

Baas, J., Schotten, M., Plume, A., Côté, G., & Karimi, R. (2020). Scopus as a curated, high-quality bibliometric data source for academic research in quantitative science studies. Quantitative Science Studies, 1(1), 377–386.

Chukwudi, U. V., Okonkwo, O. T., & Asika, E. R. (2020). Effect of tax planning on firm value of quoted consumer goods manufacturing firms in Nigeria. International Journal of Finance and Banking Research, 6(1), 1–10.

Coad, A., Segarra, A., & Teruel, M. (2013). Like milk or wine: Does firm performance improve with age?. Structural Change and Economic Dynamics, 24(1), 173–189.

Cochran, W.G. (1954) The combination of estimates from different experiments. Biometrics, 10,101-129.

Cook, R.D., & Weisberg, S. (1982). Residuals and influence in regression. New York: Chapman and Hall.

Fagbemi, T. O., Olaniyi, T. A., & Ogundipe, A. A. (2019). The corporate tax planning and financial performance of systemically important banks in Nigeria. Economic Horizons, 21(1), 15–27.

Gatsi, J. G., Gadzo, S. G., & Kportorgbi, H. K. (2013). The effect of corporate income tax on financial performance of listed manufacturing firms in Ghana. Research Journal of Finance and Accounting, 4(15), 118–125.

Hoffman, W. H. (1961). The theory of tax planning. The Accounting Review, 36(2), 274-281.

Kawor, S., & Kportorgbi, H. K. (2014). Effect of tax planning on firms market performance: Evidence from listed firms in Ghana. International Journal of Economics and Finance, 6(3), 162–168.

Kayode, O. O., & Folajinmi, A. F. (2020). Corporate tax planning and financial performance of quoted food and beverages firms in Nigeria. Journal of Finance and Accounting, 8(6), 266–275.

Lee, J. (2009). Does size matter in firm performance? Evidence from US public firms. International Journal of the Economics of Business, 16(2), 189–203.

Lestari, N., & Wardhani, R. (2015). The effect of the tax planning to firm value with moderating board diversity. International Journal of Economics and Financial Issues, 5(February), 315–323.

Lin, X., Liu, M., So, S., & Yuen, D. (2019). Corporate social responsibility, firm performance and tax risk. Managerial Auditing Journal, 34(9), 1101–1130.

Mark, W. G. (2021). Effect of international tax planning on the financial performance of multinational corporations in West Africa. Bingham International Journal of Accounting and Finance (BIJAF), 2(1), 1–15. Retrieved from http://34.29.95.55:8080/jspui/bitstream/123456789/552/1/Effect%20of%20International%20Tax%20Planning%20on%20the%20Financial%20Performance%20of%20Multinational%20Corporations%20in%20West%20Africa.pdf

Oeta, S., Kiai, R., & Muchiri, J. (2019). Influence of tax planning on financial performance of manufacturing companies listed at Nairobi Securities Exchange. International Journal of Research in Business and Social Science (2147- 4478), 8(6), 262–270.

Ogundajo, O. G., & Onakoya, A. B. (2016). Tax planning and financial performance of Nigerian manufacturing companies. International Journal of Advanced Academic Research Social & Management Sciences, 2(7), 64–80.

Olarewaju, O. M., & Olayiwola, J. A. (2019). Corporate tax planning and financial performance in Nigerian non-financial quoted companies. African Development Review, 31(2), 202–215.

Olayiwola, J., & Okoro, S. (2021). Tax planning, corporate governance and financial performance of selected quoted non-financial companies in Nigeria (2007-2018). Organizations and Markets in Emerging Economies, 12(2), 332–352.

Olurankinse, F., & Mamidu, A. I. (2021). Corporate tax planning and financial performance of development banks in Nigeria. European Journal of Accounting, Auditing and Finance Research, 47(4), 124–134.

Tackie, G., Agyei, S. K., Bawuah, I., Adela, V., & Bossman, A. (2022). Tax planning and financial performance of insurance companies in Ghana: The moderating role of corporate governance. Cogent Business and Management, 9(1), 1–18.

Thanjunpong, S., & Awirothananon, T. (2019). The effect of tax planning on financial performance in the stock exchange of Thailand. International Journal of Trade, Economics and Finance, 10(1), 25–29.

Viechtbauer, W. (2005). Bias and efficiency of meta-analytic variance estimators in the random-effects model. Journal of Educational and Behavioral Statistics, 30(3), 261–293.

Viechtbauer, W. (2010). Conducting meta-analyses in R with the metafor package. Journal of Statistical Software, 36(3), 1–48.

Vržina, S. (2018). Corporate income tax planning and financial performance: Evidence from Serbia. Contemporary Issues in Economics, Business and Management - EBM, January, 464–470.

Yahaya, O. A., & Lamidi, Y. (2015). Empirical examination of the financial performance of islamic banking in nigeria : A case study approach. International Journal of Accounting Research, 2(7), 1–13.