Tax Savings Strategies and Financial Performance of Listed Consumer Goods Companies in Nigeria

ABSTRACT: This study investigates the impact of corporate tax strategies on the financial performance of listed consumer goods firms in Nigeria, employing an ex post facto research design and panel data from 18 companies covering the period 2012–2023. Return on assets was used as a proxy for financial performance, while corporate tax-saving strategies were measured by capital intensity, generally accepted accounting principles effective tax rate, thin capitalization, non-debt tax saving strategies, debt tax saving strategies, and tax paid to cash flow ratio. Quantile regression served as the primary analytical technique, supported by descriptive statistics, correlation analysis, and diagnostic tests, to capture heterogeneous effects across different performance levels. The findings reveal that capital intensity negatively influenced profitability at the 0.25 quantile, while thin capitalization displayed a performance-sensitive effect: negative at lower quantiles but positive and significant at higher quantiles, aligning with the trade-off theory of capital structure. Other tax strategies, including effective tax rate, non-debt, and debt-related tax incentives, showed no significant effect across quantiles, while liquidity management, measured by tax paid to cash flow, had only a marginal effect at the 0.25 quantile. These results indicate that corporate tax strategies are not uniformly effective but vary according to firm performance levels, with thin capitalization emerging as the most critical determinant. The study concludes that underperforming firms should focus on asset efficiency and liquidity, while highly profitable firms can strategically benefit from debt. It recommends that managers adopt performance-responsive tax strategies, regulators strengthen oversight on debt financing, and policymakers enhance the effectiveness of non-debt tax incentives. This research contributes to the literature by demonstrating the heterogeneous role of tax strategies in shaping firm performance in Nigeria’s consumer goods sector.