Effect of Corporate Governance Mechanisms on Tax Compliance of Listed Manufacturing Companies in Nigeria

Abstract

This study examined the effect of corporate governance mechanisms on tax compliance of listed manufacturing companies in Nigeria. The corporate governance mechanisms considered in the study include board size, board gender diversity, audit committee size, risk management committee, and institutional ownership (independent), while tax compliance, the dependent variable, was proxied by the effective tax rate (ETR). The study adopted an ex-post facto research design. The population comprised all 60 listed manufacturing companies on the Nigerian Exchange Group as at 31 December 2023, out of which a sample of forty (40) companies was selected using relevant filters over a six-year period spanning 2018 to 2023. Panel data were sourced from published annual reports and accounts of the sampled firms. Descriptive statistics, correlation analysis, and fixed effect panel regression techniques were employed for data analysis. The findings revealed that board gender diversity, risk management committee, and institutional ownership have a positive and statistically significant effect on tax compliance of listed manufacturing companies in Nigeria. Conversely, board size and audit committee size were found to have negative but statistically insignificant effects on tax compliance. The study concluded that the effectiveness of corporate governance in enhancing tax compliance depends more on the quality, diversity, and monitoring capacity of governance mechanisms rather than on their numerical strength alone. The study recommended amongst others that companies should promote gender-inclusive board policies, strengthen risk management committees with relevant expertise, and encourage active participation of institutional investors.