Relationship Between Statutory Payments and Profitability of Deposit Money Banks in Nigeria

Relationship Between Statutory Payments and Profitability of Deposit Money Banks in Nigeria

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  • December 5, 2022
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Firm stakeholders argue that statutory charges have negative contributions to firm’s value. Empirical findings to support positive contributions of taxes and levies are lacking while the few researches on taxes and overall firm’s value are still under debate and remained inconclusive. The study examined the relationship between statutory payments and profitability of deposit money banks in Nigeria using data from 2011 to 2020. Corporation tax (CIT), technology tax (TCT), and tertiary education tax (TET) were the independent variables and proxies for statutory payments while earnings per share (EPS) was used as the dependent variable and measure for profitability. A sample of four (4) deposit money banks was selected from the 13 deposit money banks listed on the Nigeria Stock Exchange as at March 31, 2022. Data extracted from the selected banks were analyzed using Spearman’s Correlation matrix. Findings from the analysis suggested that CIT positively and weakly related with EPS; while TCT and TET are both positively and strongly associated with EPS. The study recommended that Management of banks in Nigeria should comply with tax regulatory authorities on corporation tax and ensure prompt payment to encourage government continued provisions of enabling environments and other public services that facilitates banking operations and growth in profitability. It further recommended that compliance with the payment of technology tax is imperative to enhance information technological development by government upon which e-transacts of modern banking businesses thrives. It also recommended that prompt payment of tertiary education tax should be encouraged for better educated and that will provide high quality service delivery in bank, reduce costs and enhance profitability. The implications of the findings were that noncompliance by banks will lead to poor provisions of public services and enabling environments for business operations, lack of researches and innovations in information technology and employment of poorly educated graduates by banks and consequent decreases in profitability

Keywords: Statutory Payments; Firm Stakeholders; Firm’s Value and Money Deposit Banks

Ugbor, R. O., Inyiama, O. I. & Ugwuanyi, U. B.