Reinvestment Allowance, Firm Attributes, and Financial Performance: Evidence from Quoted Industrial Firms in Nigeria

<p><em><span lang="EN-GB">The study examined how the reinvestment allowance affects industrial firms' financial performance on the Nigerian Exchange while considering firm attributes like size and leverage as moderating factors. This stu<a name="_GoBack"></a>dy employed a balanced panel approach with a dataset of 14 firms from the Exchange spanning 12 years from 2012 to 2023. Key performance indicators, including Return on Capital Employed (ROCE), Price Earnings Ratio (PER), and Tobin’s Q, were computed to assess firm performance. This study conducted multiple regression analysis to assess the effect of reinvestment allowance on the computed indicators. Findings indicate that reinvestment allowance positively and significantly affects ROCE and Tobin’s Q, implying that harnessing such allowances enhances both operational and market performance perception of the firm. Nevertheless, the allowance does not have any significant effect on PER, implying that there are no important impacts on the market expectation of earnings. Further, the analysis reveals firm size as a positive moderator, increasing the impact of reinvestment allowance on firm performance.Conversely, leverage functions as a negatively moderating factor, indicating that increased levels of debt might diminish the positive impact of the allowance on firm performance. For tax policymakers and financial managers striving to reconcile tax incentives with sustainable growth, these conclusions are quite critical. This research contributes to the discourse on tax strategy in conjunction with corporate finance by optimizing investment decisions and enhancing the firm’s value.</span></em></p>