Corporate Governance, Ownership Structure, and Aggressive Tax Planning of Listed Multinational Firms in Nigeria

Abstract

AbstractThis study examines the relationship between corporate governance, ownership structure andaggressive tax planning (ATP) of listed multinational companies in Nigeria. Although there isevidence on the economic drivers of tax avoidance, the discipline effect of internal governanceand the impact of financial expertise on boards and audit committees on tax avoidance is stilldebatable, especially in the context of emerging markets. The paper identifies five governanceand ownership characteristics: board independence, board financial expertise, audit committeeexpertise, ownership concentration and institutional ownership. Aggressive tax planning isproxied by the book–tax difference (BTD) and is estimated by a Random Effects panelregression, chosen using a Hausman specification test, using a balanced panel of 21 listedmultinational firms over 2015–2024 (210 firm-year observations) and controlling for firm-levelfinancial characteristics. The diagnostic tests show that there is homoskedasticity and nomulticollinearity. The findings show a paradox of governance. As expected, Board independence(β = –1.268, p < .001) and ownership concentration (β = –0.539, p < .001) have significantnegative impacts on ATP. Interestingly, board financial expertise (β = 0.906, p < .001) and auditcommittee expertise (β = 1.734, p < .001) – the strongest governance predictor in the model – arepositively and significantly related to higher tax aggressiveness, lending weight to an "expertiseas-enablement" interpretation – financial expertise is used to develop more complex and legallydefensible avoidance plans. The institutional ownership is negative, but not statisticallysignificant, which is due to the diverse goals of institutional investors. The results contradict theview that technical expertise is always a curb on avoidance and have immediate policyimplications for Nigeria's tax-governance policy, disclosure rules and design of board and auditcommittee mandates.