Nigerian Journal of Banking and Financial Issues (NJBFI)

The impact of company income tax on the dividend Policy of quoted deposit money banks in Nigerian stock market

Abstract

This study examined the impact of company income tax on the dividend policy of quoted deposit money banks in Nigeria. Specifically, the study sought-after the relationship between companies income tax and dividend per share of deposit money banks in Nigeria; investigated the impact of education tax on dividend per share of deposit money banks in Nigeria; assessed the effect of profit after tax on dividend per share of deposit money banks in Nigeria and determined the direction of causality between companies income tax and dividend per share of deposit money banks in Nigeria. The study adopted the ex-post facto research design. Panel data sets spanning 2012-2020 was pooled for five (5) quoted deposit money banks. Data obtained was estimated using pooled OLS regression analysis, fixed effect and random effect panel analysis, panel granger causality test alongside post estimation was carried out. Findings from the study indicated that companies income tax exerts negative significant impact on dividend per share of deposit money banks (DMBs) in Nigeria .0053184 (p=0.046<0.05); education tax exerts negative significant impact on dividend per share of deposit money banks in Nigeria -.0563712 (p=0.017<0.05); the impact of profit after tax on dividend per share of deposit money banks in Nigeria was positive with 0.936993 (p=0.014<0.05),  a bidirectional causal relationship exists between dividend policy, company income tax and education tax while a unidirectional causal relationship exists between dividend policy and profit after tax. Premised on these findings, the study suggested that government should implement standardize tax audit and investigation practices  as well as demonstrate caution with the use of penalties on defaulters; management of deposit money banks should harness other investment alternatives with relatively low tax rates and maintain good dividend policy and management of deposit money banks should exert increased effort on the expansion of their operational scope and also explore tax policy initiatives including tax relief, tax holiday and tax amnesty to legitimately reduce tax liabilities.