Effect of Tax Planning on Firm Value of Manufacturing Firms Listed At the Nairobi Securities Exchange

Abstract

This study examined the effect of tax planning on firm value of manufacturing firms listed at the Nairobi Securities Exchange for a ten-year period 2010 to 2019. Specifically, the study sought to: evaluate the influence of assets’ tangibility on firm value of manufacturing firms listed at the Nairobi Securities Exchange; determine the influence of leverage on firm value of manufacturing firms listed at the Nairobi Securities Exchange; and establish the effect of effective tax rate on firm value of manufacturing firms listed at the Nairobi Securities Exchange. The study was anchored on three theories: the pecking order theory; the agency theory and the political power theory. The study adopted longitudinal research survey and employed panel least squares analysis. The population of this study was all the 13 manufacturing companies listed on the manufacturing, construction and allied sectors of the Nairobi Securities Exchange as of December 2020. Due to the small number of firms, census technique was adopted and hence sampling was be required. Findings of the study indicated that asset tangibility had a positive, though statistically insignificant effect on firm value. Leverage was found to have a positive and a statistically significant relationship with firm value. Furthermore, results of the study indicated that effective tax rate had a positive and statistically significant influence on firm value.