EFFECT OF TAX INCENTIVES ON THE GROWTH OF LISTED COMPANIES IN NIGERIA

Abstract

Tax incentives are given to achieve some economic goals, among which is to foster business
growth of companies. Despite the tax incentives given to Nigeria businesses over the years, firms
are proved to be still faced with growth difficulty. This study examines the effect of tax incentives
on the growth of listed firms in Nigeria. Panel data for the study were obtained from the annual
reports of the sampled companies, Nigeria Stock Exchange yearly fact books and financial
service websites for a period of seven years (2012-2018). The study used Partial Least Square
Structural Equation Modeling (PLS-SEM) as techniques of data analysis to test the effect of tax
incentives on business growth. Tax incentive was constructed by four formative indicators:
capital allowance, investment allowance, loss relief and interest incentive, while growth was
constructed with three reflective indicators: revenue, total asset and number of employees. The
measurement model evaluation revealed that both the formative and reflective constructs were
valid and reliable. The findings revealed that there is significant effect of tax incentives on
business growth of listed firms in Nigeria.
Keywords: Tax incentives, Firm Growth, Capital Allowance, Investment Allowance, Interest
Incentive, Loss Relief, PLS-SEM