Corporate Tax Avoidance and the Cost of Debt Capital of Listed Manufacturing Companies in Nigeria

Main Article Content

Halima Abdullahi Baba
Prof. Muhammad Liman Muhammad


Purpose: The study “Tax Avoidance and Cost of Debt Capital in Nigerian Manufacturing Companies” is empirical research that investigates the relationship between tax avoidance and cost of debt capital in Nigerian manufacturing companies.
Design/Methodology: The study uses a quantitative research design, which involves the collection of numerical data to test hypotheses. Specifically, the study uses a correlational design to establish the relationship between tax avoidance and cost of debt capital in Nigerian manufacturing companies. The study uses a purposive sampling technique to select 42 Nigerian manufacturing companies listed on the Nigerian Stock Exchange. The study collected secondary data from the annual reports and financial statements of the selected companies for the period 2011–2020.
Findings: The results of the empirical analysis include the fact that the cost of debt capital was found to have a strong and positive link with tax avoidance. As a result, tax avoidance is regarded as a symptom of rising information risk in Nigerian manufacturing firms, prompting investors to demand a high rate of return. Total accruals also showed a positive and significant relationship between tax avoidance and cost of debt.
Practical Implications: The findings of the study indicate that policymakers may need to implement measures to improve tax enforcement and increase transparency in financial reporting. This could involve increasing resources for tax authorities, strengthening legal frameworks for tax compliance, and promoting better corporate governance practices among companies.


Download data is not yet available.

Article Details

Baba, H. A., & Muhammad, M. L. (2023). Corporate Tax Avoidance and the Cost of Debt Capital of Listed Manufacturing Companies in Nigeria. SEISENSE Journal of Management, 6(1), 74-83.
Research Articles

Copyright (c) 2023 Halima Abdullahi Baba, Prof. Muhammad Liman Muhammad

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

Amininia, M., & Ahmad, K. (2013). Examining the relationship between tax avoidance and cost of debt with regard to ownership type. Journal of Tax Research, 21(19), 135–156.

Bhojraj, S., & Sengupta, P. (2003). Effect of corporate governance on bond ratings and yields: The role of institutional investors and directors. Journal of Business, 76(3), 455–475. DOI:

Chen, S., Chen, X., Cheng, Q., & Shevlin, T. (2010). Are family firms more tax aggressive than non family firms? Journal of Financial Economics, 98, 41–61. DOI:

Desai, M. A., & Dharmapala, D. (2009). Corporate tax avoidance and firm value. Review of Economics and Statistics, 91(3), 537–546. DOI:

Dyreng, S. D., Hanlon, M., & Maydew, E. L. (2019). When does tax avoidance result in tax uncertainty. The Accounting Review, 94(2), 179–203. DOI:

Dyreng, S. D., & Lindsey, B. (2009). Using financial accounting data to examine the effect of foreign operations located in tax havens and other countries on U.S. multinational firms’ tax rates. Journal of Accounting Research, 47(5), 1283–1316. DOI:

Fabozzi, F., Cheng, X., & Ren-Raw, C. (2007). Exploiring the components of credit risk in credit default swaps. Journal of Finance Research Letter, 4(1), 10–18. DOI:

Fitria, G. N., Handayani, R., Subiyanto, B., & Molina. (2020). The influence of tax avoidance on cost of debt with managerial opportunism as ariable moderating. Saudi Journal of Economics and Finance, 4(5), 170–175. DOI:

Fuadah, L. ., & Kulsum, U. (2021). The impact of corporate social responsibility on firm value: The role of tax aggressiveness in Indonesia. Journal of Asian Finance, Economics and Business, 8(3), 209–216.

Graham, J. R., & Tucker, A. L. (2006). Tax shelters and corporate debt policy. Journal of Financial Economics, 81(3), 563–594. DOI:

Gujarati, D. (2004). Basic econometrics (Hill & Irwan (eds.); Fourth Edi). mcgraw.

Hanlon, M., & Heitzman, S. (2010). A review of tax research. Journal of Accounting and Economics. DOI:

Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behaviour, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305–360. DOI:

Kholbadalov, U. (2012). The relationship of corporate tax avoidance , cost of debt and institutional ownership : evidence from Malaysia. Atlantic Review of Economics, 2, 1–36.

Kim, W. J., & Jang, G. B. (2018). Relationship between tax avoidance and key financial indicators in Korea’s construction watse disposal industry. Academy of Accounting and Financial Studies Journal, 22(3), 1–12.

Kovermann, H. (2018). Tax avoidance, tax risk and the cost of debt in a bank dominated economy. Journal of Managerial Auditing, 33(8/9), 683–699. DOI:

Kraus, A., & Litzenberger, R. H. (1973). A state preference model of optimal financial leverage. The Journal of Finance, 28(4), 911–922. DOI:

Lastiati, A., Siregar, S. V., & Diyanty, V. (2020). Tax avoidance and cost of debt: Ownership structure and corporate governance. Pertanika Journal of Social Sciences & Humanities, 28(1), 533–546.

Lim, Y. (2011). Tax avoidance, cost of debt and shareholder activism: Evidence from Korea. Journal of Banking & Finance, 35, 456–470. DOI:

Masri, I., & Martani, D. (2014). Tax avoidance behavior towards the cost of debt. International Journal of Trade and Global Markets, 7(3), 235–249. DOI:

Miller, A., & Oats, L. (2014). Principles of international taxation (Fourth Edi). Bloomsbury Professional.

Modigliani, F. and Miller, M. H. (1963). Corporate income taxes and the cost of capital: A correction. American Economic Review, 53(3), 433–443.

Nguyen, M. H., Thi, T. T. P., & Vuong, P. M. (2022). Relationship between tax avoidance and institutional ownership over business cost of debt. Cogent Economics & Finance, 10(1), 1–11. DOI:

Noor, R., Mastuki, N., & Bardai, B. (2009). Book tax difference and value relevance of taxable income. Financial Reporting and Accounting, 7(2), 19–40. DOI:

Oyebamiji, A. (2016). Employee compensation and tax planning. In ICAN MPCE.

Saifullahi, M. A., Mohammed, A., & Hassan, S. U. (2015). Ownership diversity and corporate performance: Evidence from Nigerian conglomerates firms. Journal of Basic and Applied Research, 1(4), 89–101.

Salehi, M., Khazaei, S., & Tarighi, H. (2019). Tax avoidance and corporate risk :Evidence from a market facing economic sanction country. The Journal of Asian Finance, Economics and Business, 6(4), 45–52. DOI:

Shin, H., & Woo, Y. (2017). The effect of tax avoidance on cost of debt capital : Evidence from Korea 1. South Africa Journal of Buisness Management, 48(4), 83–89. DOI:

Sikes, S. A. (2020). Aggregate corporate tax avoidance and cost of capital. Available at SSRN: or DOI:

Wang, X. (2010). Tax Avoidance , Corporate Transparency , and Firm Value. DOI: