OWNERSHIP CONCENTRATION, PROFITABILITY AND TAX AVOIDANCE OF LISTED COMPANIES IN NIGERIA

Abstract

This study examined the relationship between ownership concentration and tax avoidance of listed companies in Nigeria, exploring the potential role of profitability as a mediating variable. The study employed a correlational research design using data from the Nigeria Exchange Group (NGX) over the period of twelve years (2011-2022). 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) as techniques for data analysis while Monte Carlo model was used to determine the level of significance of the indirect effects to hypotheses formulated. The study’s findings demonstrate that ownership concentration affects tax avoidance behavior, implies that concentrated ownership encourages management to conduct tax avoidance as an effort to obtain additional capital for the firm's investment needs so that companies tend to shift current taxes to future taxes. Also, ownership concentration has negative and insignificant effect on profitability and profitability functions as a mediating factor in the correlation between concentrated ownership and tax avoidance of the listed companies in Nigeria. This study proves the existence of agency problems where concentrated ownership expropriates minority interests. Based on these findings, the study recommended that management of the listed companies in Nigeria should be encouraged to explore more avenues of tax avoidance strategies, as the schemes improve level of profitability and increase shareholders’ returns on investment.