THE MODERATING EFFECT OF FIRM SIZE ON TAX SAVING AND INVESTMENT EXPENDITURE IN NIGERIA

Abstract

This study examines how taxation and firm characteristics influence investment expenditure. It differs from previous taxation-led investment expenditure narrative that probe whether taxation exerts a positive effect on investment expenditure. The empirical evidence is based on Pooled Ordinary Least Square regression techniques. The study engages data on 119 non-financial firms in Nigeria from 2010 to 2022. Results from the Pooled Ordinary Least Square show that: (1) tax savings exerts a positive effect on investment expenditure. (2) the interaction effect of tax savings and firm size is positive however not significant. This implies that tax savings raises investment expenditure. Also, that expansion in firm size raises the impact of tax savings on investment expenditure. This is on the grounds that managers lessens taxable income to raise investment expenditure. Based on the findings, the following recommendations are made for non-financial firms in Nigeria: (1) concentrate on the increase in total asset to increase their total investment expenditure which will increase profitability. (2) tax authorities should initiate an organized and flexible tax system to avoid negative tax savings from non-financial firms.