Managerial Ownership and Tax Avoidance of Listed Companies in Nigeria with Profitability as Mediating Variable

Abstract

This paper examines the mediating effect of profitability on the relationship between managerial ownership and tax avoidance of listed companies in Nigeria. The study employed a correlational research design using data from the Nigeria Exchange Group (NGX) over the period of twelve years (2010-2021). Data was extracted from the annual report and accounts of the 121 out of 156 companies that were listed for the period. The data collected were analyzed using descriptive statistics, correlation and Structural Equation Modeling (SEM) were used as techniques for data analysis while Monte Carlo model was used to determine the level of significance of the indirect effects and the hypotheses formulated were tested. The study’s findings demonstrate that managerial ownership affects tax avoidance behavior and that the relationship between managerial ownership and tax avoidance is mediated by the level of profitability. Based on these findings, the study recommended that shareholders need to pay closer attention to corporate tax matters to verify that the business has complied with its tax duties accurately and completely. Also, to reduce the level of principal-agent conflicts and enhance tax avoidance by monitoring management activities, listed companies in Nigeria should encourage managerial shareholding because some directors do not have share in sampled companies. Furthermore, the findings could be employed to inform policy makers on effective managerial shareholding on tax avoidance among listed companies in Nigeria.