TAX INCENTIVE STRATEGIES AND FINANCIAL PERFORMANCE OF LISTED DEPOSIT MONEY BANKS IN NIGERIA

Abstract

This study examined the effect of tax incentives on the financial performance of listed deposit
money banks in Nigeria, with a focus on effective tax rate reduction and investment tax
allowance utilization as the key proxies. The dependent variable, financial performance, was
measured using return on equity. The study adopted a quantitative research design,
employing secondary data from the annual financial statements of 13 listed banks over the
period 2015–2024. Jaiz Bank Plc was filtered due unavailability of information for 2015 and
2016. Stata17 served as the tool of data analysis. Panel data regression analysis using the
Panel- Corrected Standard Errors (PCSE) technique was conducted to estimate the impact
of the independent variables on ROE, with diagnostic tests for multicollinearity and
heteroskedasticity ensuring the robustness of the results. Regression results indicated that
both effective tax rate reduction (β = 0.421, p = 0.000) and investment tax allowance
utilization (β = 0.318, p = 0.010) positively and significantly influenced return on equity,
confirming the a priori expectation that tax incentives enhance shareholder returns. The
findings are supported by resource-based view theory, which highlighted the role of tax
incentives as strategic resources that improve managerial efficiency and competitive
advantage. The study concludes that effective utilization of tax incentives is critical for
enhancing bank profitability. Accordingly, it recommends that bank management actively
leverage available tax incentives, while regulators and policy makers provide clear
guidelines and expand investment-linked tax schemes to promote financial sector growth.