@article{MAKHILLPJSS20201717757,
    title = {The Impact of Taxes on the Borrowing Behaviour of Nigerian Quoted Firms},
    journal = {Pakistan Journal of Social Sciences},
    volume = {17},
    number = {1},
    pages = {59-76},
    year = {2020},
    issn = {1683-8831},
    doi = {pjssci.2020.59.76},
    url = {https://makhillpublications.co/view-article.php?issn=1683-8831&doi=pjssci.2020.59.76},
    author = {Oluseun},
    keywords = {Capital structure,marginal tax rate,corporate and personal taxes,firm-specific characteristics,pecking order,trade-off},
    abstract = {An underexplored research in modern finance
theory borders on the issue of taxes and corporate debt
policy. Financial theory should be able to explain why
large, profitable and heavy tax paying firms do not fully
exploit the potential tax savings generated by debt. At
best, partial explanations exist for debt conservative
behavior. This study delves into the role of taxes on
corporate borrowing in Nigeria. The population of study
comprises all non-financial corporations quoted on the
Nigerian Stock Exchange (NSE) for the period 1999-2014
out of which 50 companies that met the minimum data
criteria were utilized. Using a combination of panel data
least squares regression, the Modigliani-Miller tax benefit
formula, the Miller equilibrium and the Graham
simulation technique, the research documents the
following findings. First, the factors that exert positive
influence on corporate borrowing include firm age,
financing deficit, asset intangibility and expected inflation
while those factors that exert negative influence on capital
structure include asset tangibility, growth, size, volatility
of earnings, profitability, liquidity, dividend-paying status
and uniqueness of industry. Second, the marginal tax rate
exerts a negative impact on corporate debt ratios and there
is weak evidence that tax considerations are crucial in
capital structure choice a position that challenges the
trade-off theory. The results were at best, mixed with
respect to the portability of pecking order, target
adjustment, agency and market conditions models.
Asymmetric information rationalizes the aggressive debt
posture of smaller, less profitable, less liquid firms with
more risky intangible assets and low dividend-payers. The
study recommends the use of non-debt tax shelters for
corporate tax planning, government simplification of tax
administration.}
    }