CORPORATE INVESTMENT DETERMINANTS OF QUOTED PETROLEUM MARKETING FIRMS IN NIGERIA By: MUSA, Usman Mamuda Department of Accounting, Faculty of Humanities, Social and Management Sciences, Federal University, Wukari, Taraba State +2347068836388 & +2348073883535 e-mail:
[email protected] &
[email protected] Abstract Investment decision is one of the managerial functions of a financial manager. The level of investment of a firm largely depends on several factors ranging from firm level to macroeconomics variables. This study is aimed at assessing the firm level factors that determine corporate investment decision of petroleum marketing firms in Nigeria. Secondary data are extracted from the Annual reports of Four (8) petroleum marketing firms in Nigeria that form the sample of the study for six years, from 2006 to 2011 and multiple regression was used as a tool of analysis. The results reveal two of the independent variable - dividend payout ratio and corporate taxation have statistically significant positive effect on corporate investment while firm size is impacting positively on investment. This implies that dividend payout ratio, corporate taxation and firm size are determinants of corporate investment of petroleum marketing firms in Nigeria. The study , therefore recommend that the management petroleum marketing firms in Nigeria should take into consideration the level of investment required to improve the firms’ profitability and prospect before designing a dividend policy. More so, government policy, especially on taxation should be designed in such a way that the level of taxation does not discourage investment by the firms, and finally, petroleum marketing firms in Nigeria should always evaluate their growth prospect so as to ascertain where and how to invest in long term assets that generate high return on investment with minimum level of risk.
Keywords: corporate investment, dividend payout ratio, corporate taxation, petroleum Marketing firms in Nigeria
1
1. Introduction Corporate organizations established for profit making need a very effective and sound financial decision in order to achieve its set aim and objectives. The central goal of a firm is to maximize the wealth of the firm’s present owners, which is much more than the goal of maximizing profit of the firm. This can only be achieved with improved financial performance supported by reasonable expansion through investing in more capital project. But the extent of investment depends largely on several factors. Investment has been defined by Jhingan and Stephen (2004) as the acquisition or production of real capital assets like factories, plants, equipment, machinery, and any other tangible asset during a particular time period. Robinson (1956) describes investment as an addition to capital such as acquisition of new building, expansion of a factory premises and so on. In essence the stock of fixed assets available in a firm for a particular period represents the volume of investment of the firm. Kurfi (2003) rightly outlined four important managerial functions of finance among which is the investment or long term asset-mix decision. Investment decision, otherwise known as capital budgeting function relates to allocation of capital and involves decision to commit funds to long term assets, which would yield benefits in the future. It is also referred to as the efficient and effective management of the firm’s assets when the assets become less productive or non profitable. A rational financial manager strive to achieve sustainable growth and development of the firm by making reasonable investment in more capital project for expansion depending on the availability of fund. According to Jangil and Kumar (2010), the behavior of firms at micro level is largely based on three (3) main decisions – investment, financing and profit allocation. Scarcity of resources compel firms to allocate these resources among competing uses. As such, these firms are faced with decisions on where and how to allocate the resources wisely. The scarcity of resources is mainly due to employing high dividend payout which may lead to frequent reliance on new floatation of shares or debt capital for the firm to meet its investment requirement. In investment decision, firms need to consider a number of factors which largely dictate the extent of investment. 2
Generally, factors that determine the level of corporate investment are classified into three (3) broad categories – firm level variables, financial market and macroeconomic factors (Bakpin & Onumah, (2009). Firm level variables include profitability, dividend payout ratio, corporate taxation, firm size, free cash flow and previous year’s investment. Macroeconomic factors include inflation, Gross Domestic Product (GDP) per capita, interest rate and exchange rate. The focus of this paper is on firm level factors among which dividend payout ratio, corporate taxation and firm size are selected for the study. Payment of corporate tax and distribution of dividend is made out of profits or reserve of the firm where available. In either case, the scenario result to cash outflow from the firm which might lead to change in level of investment of the firms, probably negative. It is therefore expected that increase in tax and/or dividend paid to owner of a firm will have a negative impact on their level of investment. But as firms increase in size and their activities become diversified, there is every need for more investment in order to meet up with internal and external challenges. With this, we expect to have a positive relationship between firm size and corporate investment. Empirical studies have been conducted in developed countries on the determinants of corporate investment (See Gugler, Mueller & Yartoglu, 2007; Bhattacharyya, 2008; Bokpin & Onumah, 2009; Nair, 2000; and Jangili & Kumar, 2000). However, in Nigeria, most of the studies concentrated on the impact of corporate taxation alone on investment decision. For example, Muhammad (2010) studied some selected food and beverages firm from 1995 to 2008 on the impact of corporate taxation on investment ignoring other determinants of investment. Another study by Adelegan, 2008 used a sample of 86 to examine the effect of taxes on investment for the 17 years (1984 to 2000), while Okpara (2010) looks at the impact of financial market on investment opportunity set. None of these studies look at other firm level factors that determine corporate investment. In addition, the time lag necessitated further studies. Moreover, though several studies have been conducted on some of the determinants of corporate investment in many industries, including Nigeria (e.g. Adelegan& Ariyo, 2008) no such study is conducted in the petroleum marketing firm. Therefore, this study examines the impact of firm level factors on corporate investment decision of petroleum marketing firms in Nigeria. The study focused on the influence of certain explanatory variables (dividend payout ratio, corporate taxation and firm size) on the firms’ 3
investment using data obtained from Annual reports and Accounts of the firms as well as the Nigerian Stock Exchange Fact book for six-year period (2006 – 2011). In line with the stated objectives, the following null hypotheses were formulated: Ho1: Dividend payout ratio has no significant impact on investment of petroleum Marketing Firms in Nigeria. Ho2: Corporate taxation has no significant impact on investment of petroleum marketing firms in Nigeria. Ho3: Firm size has no significant impact on investment of petroleum marketing firms in Nigeria. The paper has been structured in five sections. In addition to the introduction which is covered in this section, section two (2) reviews relevant literatures on the determinants of corporate investment. Section three (3) discusses the methodology employed for the study. In section four (4), the result of data analysis are presented and discussed. Conclusion and recommendation follow in section five (5) by highlighting the major findings and its policy implications. 2. Literature Review and Theoretical Framework In this section, studies on the determinants of corporate investment are reviewed. Specifically, the study concentrates on dividend payout ratio, corporate taxation, proxied by effective Tax Rate (ETR) and firm size as they affect corporate investment. Studies conducted establish that several factors determine investment by firms. For example, Bokpin and Onumah (2009) investigate the determinants of corporate investment in emerging market from 1992 to 2007 using data obtained from thirty-six (36) different countries, Nigeria exclusive. They were able to establish that dividend payout ratio significantly affect corporate investment. The fact that this study is not narrowed to a particular country makes the result too generalized and in addition, Nigeria was not included in the sample. There is the need for a study to see what obtains in Nigeria. A year later, Jangili and Kumar (2010) come up with a study on the determinants of private corporate sector investment in India from 2000 to 2009. This study establishes that dividend payout ratio and corporate investment are positively related. This study also has a set back because it is a foreign study. 4
Some studies assess the impact of corporate taxation on investment. Djankov et al (2010) use a sample of 85 countries to examine the effect of corporate taxation on investment. The study established that Effective Tax Rate have a large negative impact on investment. Arnold and Schwellnus (2008) also investigated the effect of corporate taxes on productivity and investment at firm level from 1994 to 2004. They found that corporate taxes reduce investment by virtue of increase in the user cost of capital. Even though, all these studies are on the determinants of corporate investment but they exclude other vital determinants of invest at firm level. Adelegan (2008) studied 86 manufacturing firms in Nigeria for 17 years (1984 to 2000) in order to find the relationship between tax and real investment. The study established, among others, that higher marginal tax rate reduce investment. In the same year, Adelegan and Ariyo (2008) observed that corporate investment is affected by amount of earnings that a firm set aside for tax as well as the average tax burden on returns from existing projects. In addition, Muhammad (2010) investigate the effect of corporate taxation on investment decision using a sample of seven (7) food and Beverages firms in Nigeria for 14 years (1995 to 2008). The author uses Ordinary Least Square (OLS), Fixed and Random effect to estimate his regression model. And it was established that Statutory Tax Rate (STR) has a strong negative effect on investment while ETR has an insignificant negative effect on investment. This study is conducted in a different sector than the petroleum marketing sector and therefore there is the need to conduct further study to cover other sectors of the Nigerian economy. Hines (2001) conducted a study on the effect of corporate taxation in relation to tax incentives such as higher capital allowance or investment tax credit. The study found that the operation of multinational corporations is influenced by tax incentives due to their ability to choose between jurisdictions with different tax features. Other studies conducted found similar results (Hines, 2005; Gordon & Hines, 2002; Slemrod, 1991; and Hines & Rice, 1990). Other studies on the effects of tax incentives on corporate investment include Cummins, Hassett and Hubbard (1995), Osimir (2002), Sosa (2005), Romer and Romer (2007), Talpos and Vancu (2009), among others. Cummins et al (1995) establish that investment pattern of United State (US) industries respond significantly to any tax reform since the year 1962. In Nigeria, Osimiri (2002) assesses the contribution of tax exemption laws as a means of attracting foreign 5
investment in the oil and Gas industry. The study notes that generous tax incentives attract foreign investors especially if it is accompanied by political stability and adherence to the rule of law. In the same vein, Sosa (2005 observes that countries in the Eastern Caribbean use tax holidays to promote corporate investment, even though, it always result to revenue losses that outweigh benefits derived from the increased investment. The study concludes that tax incentives do not significantly impact on corporate investment. This finding is in contrast with the study of Romer and Romer (2007) that finds significant negative effect of corporate tax on investment, while it is in line with the study of Talpos and Vancu (2009). Studies on the effect of corporate tax burden on investment yield different results. For example, Fazzari, Petersen and Hubbard (1989) establish that corporate taxation generally affect investment especially in firms facing information asymmetry. In contrast to this finding, Talpos and Vancu (2009) decide to investigate the effect of corporate tax burden on investment decision taking a sample of 27 European Union (EU) member states. The study finds that tax is not a major determinant of corporate investment. On the relation hip between firm size of a firm and its level of investment, Bokpin and Onumah (2009) conducted an empirical analysis of the firm level determinants of corporate investment decisions 34 emerging market world over. The result of the study supported existing literature about the impact of certain firm level factors on corporate investment decision. The study found a statistical positive association between firm size and investment. The theoretical underpinning of this study is based on the traditional Theories on Determinants of Investment. A number of theories have emerged to elucidate the private investment behavior in developed countries. The bottom of the majority of these approaches and the simplest among them was the accelerator theory of investment, also known as “acceleration principle” which states that: sales change is a demand side factor that plays an important role in determining private corporate investment. Another model developed by Jorgenson (1967) is called a neo-classical flexible accelerator model, which incorporates the user cost of capital (interest rate, depreciation and price of capital goods) and also the accelerator effect to explain the investment behavior. Jorgenson’s model has its root from the theory of optimal capital allocation. The theory of a profit maximizing firm, 6
subject to a production function through which a technical relationship between inputs and outputs get defined is essential in neo-classical model. The basic assumptions of the model for a firm to make best use of its present value are: (a) The rate of change of the input of capital services is equal to the rate of net investment; (b) The relationship between levels of output and inputs of labor and capital services is inhibited by a production function. The production function also connects the capital stock to the relative price between capital and output. The model assumes elastic accelerator prices and perfect capital and other markets. It implies that, there are no liquidity constraints to adjust capital stock and a general equilibrium situation with full employment. The empirical evidence is consistent with this accelerator effect and shows that high output growth is associated with high investment rates (Greene and Villanueva, 1991). However, the empirical tests have been less successful in establishing a robust negative relationship between the interest rate and investment. Neo classical theory suggests that high interest rates raise the cost of capital, which reduces the investment rate. This variety to some extent reflects uncertainty about the appropriate form of the private investment model for developing countries. Though the empirical tests of various models including the most broadly accepted neo-classical flexible accelerator model, have been quite successful, the application in the developing countries context is rather difficult due to the inherent assumptions of the model and the inadequacy or non-availability of data for certain variables. As a result, investment research has moved in many directions in a process to identify the proper economic variables that might be expected to affect private investment. In recognition of the limitations to adopt the above theoretical models in their context, developing countries stirred from traditional theories to center on the role of economic policies in determining investment. 3. Research Methodology The study investigates the determinants of corporate investment in the petroleum marketing firms in Nigeria. The study covers a period of six (6) years (2006-2011). Of the nine (9) listed petroleum marketing firms, four (4) firms constitute the sample for the study. The selected 7
companies are those that are listed prior to the period of the study. In addition, firms included in the sample size includes all firms with positive earnings throughout the period of the study (2006-2011), firms with record of dividend payments during the period of the study (2006-2011) and firms with record of cash flow from investing activities during the period of 2005-2011, firms with more than 10 years of operation. After the application of the above filter, four (4) firms emerged out of 8 as the sample of the study. These firms are: CONOIL PLC, MOBIL OIL NIGERIA PLC, OANDO PLC, and TOTAL NIGERIA PLC. The methodology that was employed in gathering data for this study is the use of documentary firm level data obtained from the annual reports and accounts of the sampled firms. Panel data methodology is employed because of the cross sectional and time series nature of the data. Multiple regression model is used as a tool of analyses to estimate the coefficient of the variables under study. Therefore, the empirical result of the study are based on the following equation which relates investment ratio (Dependent variable) as function of dividend payout ratio, Effective Tax Rate (ETR), and firm size (explanatory variables):
INVT jt = β0 + β1 DPOR jt + β2 ETRjt + β3 FSIZEjt + ejt Where: INVTjt = Ratio of Gross Fixed Investment during the year to the Gross Fixed Asset at the beginning of the year of firm j at time t DPORjt = Dividend payout ratio measured as the ratio of dividend paid to profit after Tax of firm j at time t ETRjt
= Effective Tax rate of firm j at time t measured as tax paid for the year divided by the preceding year profit before tax
FSIZEjt
= Firm size of firm j time t measured natural log of total asset. Total assets were divided by N1,000,000 before the transformation.
β0
= Constant or intercept.
β1-3
= Coefficients of explanatory variables
εjt
= Error term
8
4. Results and discussion In this section, results are presented and discussed based on the major findings. Table 4.1 presents the descriptive statistics of the variables of the study. Table 4.1: Descriptive statistics Variable
INVT
DPOR
ETR
FSIZE
Minimum
0.03
.19
.02
10.02
Maximum
.73
.67
.61
13.28
Mean
.2596
.3988
.3196
11.2488
Std. Dev.
.13541
.14256
.19692
.94152
Tolerance value
NA
.902
.804
.879
VIF
NA
1.109
1.244
1.138
Observations
24
24
24
24
Kolmogorov-Smirnov statistics (sig value)
.203
.113
.151
.234
(.012)
(.200)
(.164)
(.002)
Shapiro-Wilk statistics (sig value)
.851
.954
.927
.838
(.002)
(.324)
(.083)
(.001)
Source: Output of data analysis using SPSS Form table 4.1 above the mean ratio of investment to gross fixed asset stood at .2596 with deviation from the mean of about 14% which is relatively low. The minimum ratio is 0.03 and the maximum is 0.73. This implies that, on average, the petroleum marketing firms invest between 3% to 73% of its existing assets in acquisition of new assets within the period of study. This high dispersion was as a result of different in sizes of the firms under study. For dividend payout ratio, the value ranges between 0.19 and 0.67 indicating that the firms use between 19% to 67% of their profit after tax in paying dividend to the shareholders. The mean value of ETR is 0.3196 with standard deviation of about 20%. The minimum rate is 2% and the maximum is 61%. This shows that the ETR is widely dispersed. The table also shows that the firms are different in size because the mean FSIZE is 11.2488 with standard deviation of about 94%. As for the normality of the data, the kolmogorov-Smirnov statistics and the Shapiro-Wilk statistics 9
show that DPOR and ETR are normally distributed as the statistics is not significant at 5% level while the significant value of INVT and FSIZE show that they are not normally distributed. To confirm the absence of multicolinearity among the independent variables, the Variance Inflation Factor (VIF) results are generally low as each of them is only slightly greater than 1.00, while a VIF of 5.00 is statistically considered acceptable (Muhammad, 2010). The tolerance values are also relatively low as they are all less than 1.0 which further expatiate the absence of multicolinearity among the independent variables. Table 4.2 shows the correlation between the dependent variable and the independent variables of the study. Table 4.2: Correlation Matrix of the Variable Variables
INVT
DPOR
ETR
INVT
1
DPOR
-.429*
1
ETR
-.186
-.313
1
FSIZE
.325
.348
-.118
FSIZE
1
Source: Output of data analysis using SPSS The results presented in table 4.2 above reveal that two of the regressors (DPOR and ETR) have negative correlation with the dependent variable (INVT) with only that of DPOR significant at 5%. This results imply that the higher the DPOR and ETR, the lower the investment and viceversa. FSIZE on the other hand has a positive but insignificant correlation with INVT. This also implies that the higher the firm size the higher the possibility of investment and vice-versa. To sum it up, ETR has the lowest correlation with the dependent variable of the firms under study. DPOR has a negative correlation with ETR at 31% but the correlation is not significant. This shows that DPOR decreases as ETR increases. Also, ETR has a negative correlation with FSIZE at 12% which is not significant signifying that as the firms increase in size, their ETR decreases. It is only DPOR and FSIZE that has a positive correlation with each other which indicates that an increase in firm size will lead to increase in the DPOR. The result show correlation among the 10
regressors ranging from -0.313 to 0.348 which are all not significant which is not on the high side. This further expatiate the absence of multicolinearity among the independent variables as explained under table 4.2. The regression results are presented and discussed in table 4.3 below: Table 4.3: Summary of Regression Result variables
T - statistics
T – Sig.
(Constant)
Unstandardized coefficient Beta -0.256
-1.017
0.321
Dividend payout ratio (DPOR)
-0.689
-4.335
0.000*
Effective Tax Rate (ETR)
-0.241
-2.217
0.038
Firm Size (FSIZE)
0.077
3.350
0.003*
Standard error of the estimate
0.09738
Multiple R
0.742
R Squared
0.550
Adjusted R Squared
0.483
F – Statistic
8.156
F – Significance
0.001*
Durbin Watson
1.865
Source: Output of data analysis using SPSS Note: * coefficient is significant at 0.05 level (2-tailed)
The regression equation as stated earlier is restated below:
INVT jt = β0 + β1 DPOR jt + β2 ETRjt + β3 FSIZEjt + ejt Substituting the computed beta values of the variables in the equation, we have:
INVT jt = -2.256 – 0.689 DPOR jt – 0.241 ETRjt + 0.077 FSIZEjt + 0.09738 The results in table 4.3 above show that the model of the study is fit. This is confirmed by the F – Significance of 0.001. The lower this number, the better the fitness of the model. Typically, if 11
“F- Significance” is greater than 0.05, we conclude that our model could not fit the data. We also test for serial correlation among the independent variables within the period of studies. The Durbin-Watson statistic value of 1.865 indicates complete absence of serial correlation because the value is within the range of 1.5 to 3.5. From table 4.3, the coefficient of determination (R squared) value of 0.550 tells us that about 55% of the variation in the regressand was explained by the regressors while the remaining 45% is being explained by other factors not captured in the model. The adjusted R squared value, after taking care of some abnormalities, stood at 0.483 indicating that the regressors explained about 48% of the variance in the regressand. The standard error of the estimate is 0.09738 shows the dispersion of the regressand around its mean value. The column for unstandardized beta coefficient in table 4.3 provides information about the effect of individual regressors on the regressand while the column for T – Significance is used to ascertain the significance or otherwise of the beta coefficient. The lower the T – Significant value, the beta the coefficient explain the regressand. It can be seen that DPOR has a T – Significant value of 0.000 which shows that its beta coefficient (-0.869) is statistically significant at 1% level (that is, 99% level of confidence). The negative sign in the beta coefficient indicates that DPOR is negatively and statistically related to the dependent variable. It implies that the higher the DPOR the lower the level of investment of petroleum marketing firm in Nigeria. This result provides us with enough evidence to reject our null hypothesis one (1) which says that Dividend payout ratio has no significant impact on investment of petroleum marketing firms in Nigeria. As DPOR is a measure of percentage of amount paid as dividend out of profit, dividend payment is likely to reduce investment which will go a long way in decreasing investment. This finding is in contrast to the study of Jangili and Kumar (2010) and Bokpin and Onumah (2009) which find that dividend payout ratio has positive impact on corporate investment. The beta coefficient for ETR is -0.241 has a T – Significance value of 0.038 which indicates that it is significant at 5% level (95% confidence level). The negative sign in the beta coefficient signifies that ETR has a negative impact on the investment of petroleum marketing firm in Nigeria. Thus, if there is a 1% increase in ETR the investment of petroleum marketing firm in Nigeria is bound to decrease by about 0.24% and vice-versa. This result has given us enough facts to reject our null hypothesis two which says that corporate taxation has no significant 12
impact on investment of petroleum marketing firms in Nigeria. This finding is in line with the study of Romer and Romer (2007), Adelegan and Ariyo (2008), Adelegan (2008), and Muhammad (2010) who establish that corporate investment is negatively affected by taxation while it is in contrast to the study of Sosa (2005) and Talpos and Vancu (2009) where corporate taxation is found to have no effect on investment. The null hypothesis three was formulated to find out whether firm size has any significant impact on corporate investment of petroleum marketing firms in Nigeria. From table 3 above, the beta coefficient for FSIZE is 0.077 with T- Significant value of 0.003 which is highly significant at 1% level (99% level of confidence). This beta coefficient has a positive value indicating that FSIZE has a positive and statistically significant impact on investment of petroleum marketing firms in Nigeria. It signifies that as these firms increase in size their level of investment also increase. With this result, we can confidently reject our null hypothesis meaning that firm size is impacting on investment of petroleum marketing firms in Nigeria. This finding is in line with the study of Bokpin and Onumah (2009) which finds a statistical positive association between firm size and corporate investment. Even though, all the three explanatory variables are statistically significant in determining level of investment of petroleum marketing firms in Nigeria, it can be confirmed from their beta coefficient that dividend payout ratio is having more impact on the dependent variable than corporate taxation and firm size. 5. Conclusion and Recommendat ion This study is set to assess factors that determine corporate investment in petroleum marketing firms in Nigeria. The study has made an enormous input to the field of investment decision of firms in the sector. Three firm level determinants of corporate investment were selected for the study - dividend payout ratio, corporate taxation and firm size – to ascertain their impact on investment of the firms. While dividend payout ratio and taxation were found to be negatively significant to investment, firm size has a statistically positive impact on investment. Among the three explanatory variables, dividend payout ratio has more impact on investment of petroleum marketing firms in Nigeria. It is therefore concluded that dividend payout ratio, corporate taxation and firm size are good determinants of corporate investment of the firms under study.
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Based on the findings and conclusion of this study, we recommend that the management petroleum marketing firms in Nigeria should take into consideration the level of investment required to improve the firms’ profitability and prospect before designing a dividend policy. This will minimize the possible risk of distributing huge amount of money to owners when the firms are in dire need of expansion through investment in long term fixed assets. Similarly, government policy, especially on taxation should be designed in such a way that the level of taxation does not discourage investment by the firms. This is because firms may decide not to invest even if the cash is available when the rate of taxation is on the high side. Finally, the management of petroleum marketing firms in Nigeria should always evaluate their growth prospect so as to ascertain where and how to invest in long term assets that generate high return on investment with minimum level of risk.
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References Adelegan, O. J and Ariyo, A (2008), “Capital Market imperfection and Corporate investment Behavior: A switching Regression Approach using Panel Data for manufacturing firms”. Journal of Money, Investment and Banking. Adelegan, O. J (2008), “Tax, investment and Q: Evidence from Firm and Industry level data in Nigeria”. International Research Journal of Finance and Economics. Arnold, J. and Schwellnus, C. (2008), “Do Corporate taxes reduce productivity and investment At the firm level”? Cross-Country evidence from the Amadeus Dataset. CEP Working Paper, No 19 pp 1- 44 Bokpin, G. A., and Onumah, J. M., (2009): “an empirical analysis of the determinants of Corporate Investment decisions: Evidence from Emerging Market firms. Cumminns, J. G., Hasset, K. A., and Hubbard, R. G. (1996), “Tax are form and investment: A cross-country comparison”. Journal of Public Economics, Vol. 62, No 1–2, pp 237–273 Djankov, S., Ganser, T., McLiesh, C., Ramalho, R., and Shleifer, A. (2010), “The effect of corporate taxation on investment and entrepreneurship”, American Economic Journal, Vol. 2, No 3 pp31 – 64 Fazzari, S. M., Petersen, B. C., and Hubbard, R. G., (1989), “Investment, financing decision and tax policy”. NBR Working paper, available at www.banrep.gov.co/documents/conferecias/papers Greene, Joshua and Delano Villaneuva (1991), “ private investment in Developing Countries: An Empirical Analysis” , IMF Staff Papers, Vol.38, No. 1: 33-58, March, 1991, Gugler, K, Mueller, D. C, And Yurtoglu, B. B (2000), Corporate Governance and the Determinants of Investment, Journal of Institutional and Theoretical Economics Hines Jnr, R. J., & Rice, E. M. (1990),”Fiscal paradise, foreign tax heaven and American Business, NBER Working paper, No 3477, pp 1 – 64. Hines Jnr, R. J., (2001), “Corporate Taxation, NBER Working paper pp 1 – 10 Jangili, R and Sharad Kumar, S (2010), Determinants of Private Corporate Sector Investment in India, Reserve Bank of India Occasional Papers, Vol. 31, No. 3, Winter 2010 available at www.rbi.org.in/scripts/bs_viewconfe Jhingan, M. L., and Stephen, J. K., (2004), Managerial Economics, New Delhi: Vrinda Publications P Ltd
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Jorgenson, Dale W (1967), “The Theory of investment Behavior”, In determinants of Investment Behavior, Rebert Ferber (ed.), National Bureau of Economic Research, Cambridge, Massachusetts. Kurfi, A. K., ((2006), “Principles of Financial Management”, 5th edition, Nigeria, Benchmark Publishers Limited. Muhammad, M. L., (2010), “Corporate Taxation and Investment Decisions; AN analysis of Listed Food and Beverages firms in Nigeria, Nigerian Journal of Accounting Research, Vol. 6, No. 1, pp 103 – 117 Nair, V. R. P (2000), Financial Liberalization and Determinants of Investment: An Enquiry into Indian Private Corporate Manufacturing Sector Centre for Development Studies available at: mpr.ub.uni-muenchen.de/39839/ Okpara, G. C., (2010), “Do emerging financial market impact on investment opportunity set”? A Dynamic analysis of Nigerian case. Osimiri, U. J. (2002), “Stimulation of Investment in International Energy through Nigerian Tax exemption laws”. OPEC Review, vol. 26, No 1 pp 45 – 60. Robinson, J., (1956), “The accumulation of capital, London: Macmillan & Co. Publisher Romer, C. D., and Romer, D. H., (2007), “ The macroeconomic effects of Tax changes: Estimate Based on a New Measure of Fiscal shocks”. NBER Working paper Series 13264, http://www.nber./papers, pp1 – 71 Slemrod, J. B., (1991), “Tax effect on Foreign Direct Investment in the United State: Evidence from a cross-country comparison”, NBER Working paper, Sosa, S., (2005). “Tax incentives and investment in Eastern Caribbean” IMF Working paper, pp 1 – 28 Surajit Bhattacharyya, S (2008): Determinants of Corporate Investment, Post Liberalization Panel Data Evidence from Indian Firms, Institute of Management Technology. India available at Online at http://mpra.ub.uni-muenchen.de/6702/ Talpos, L., and Vancu, L., (2009), “Corporate income Tax effect on investment decisions in the European Union” Annales Universitatis Apulensis Series Oeconomica, Vol. 11, No. 1, pp 1–6
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APPENDIX Tests of Normality Kolmogorov-Smirnova Statistic
df
Shapiro-Wilk
Sig.
Statistic
df
Sig.
investment
.203
24
.012
.851
24
.002
dividend payout ratio
.113
24
.200*
.954
24
.324
effective tax rate
.151
24
.164
.927
24
.083
firm size
.234
24
.002
.838
24
.001
a. Lilliefors Significance Correction *. This is a lower bound of the true significance.
Statistics dividend payout investment N
Valid
ratio
effective tax rate firm size
24
24
24
24
8
8
8
8
Mean
.2596
.3988
.3196
11.2488
Median
.2650
.3900
.3150
10.9450
.13541
.14256
.19692
.94152
1.512
.110
.052
1.169
.472
.472
.472
.472
5.865
-1.070
-1.410
.308
.918
.918
.918
.918
Minimum
.03
.19
.02
10.02
Maximum
.73
.67
.61
13.28
25
.2000
.2925
.1425
10.6175
50
.2650
.3900
.3150
10.9450
75
.3175
.5375
.5100
11.5200
Missing
Std. Deviation Skewness Std. Error of Skewness Kurtosis Std. Error of Kurtosis
Percentiles
17
Correlations
investment investment
Pearson Correlation
dividend
effective
payout ratio
tax rate
-.429*
-.186
.325
.037
.384
.121
24
24
24
24
-.429*
1
-.313
.348
.136
.096
1
Sig. (2-tailed) N dividend payout ratio
Pearson Correlation Sig. (2-tailed)
.037
N effective tax rate
24
24
24
24
-.186
-.313
1
-.118
.384
.136
24
24
24
24
Pearson Correlation
.325
.348
-.118
1
Sig. (2-tailed)
.121
.096
.583
24
24
24
Pearson Correlation Sig. (2-tailed) N
firm size
firm size
N
.583
24
*. Correlation is significant at the 0.05 level (2-tailed). Model Summaryb Change Statistics
Model
R
1
.742a
Adjusted
Std. Error of
R Square
F
R Square R Square
the Estimate
Change
Change
.550
.483
.09738
.550
df1
8.156
df2 3
Sig. F
Durbin-
Change
Watson
20
.001
1.865
a. Predictors: (Constant), firm size, effective tax rate, dividend payout ratio b. Dependent Variable: investment ANOVAb Model 1
Sum of Squares
df
Mean Square
Regression
.232
3
.077
Residual
.190
20
.009
Total
.422
23
F 8.156
Sig. .001a
a. Predictors: (Constant), firm size, effective tax rate, dividend payout ratio b. Dependent Variable: investment
18
Coefficientsa
Model 1
Unstandardized
Standardized
Coefficients
Coefficients
B (Constant) dividend payout ratio effective tax rate firm size
Std. Error
-.256
.251
-.689
.159
-.241 .077
Beta
Collinearity Statistics t
Sig.
Tolerance
VIF
-1.017
.321
-.725
-4.335
.000
.804
1.244
.109
-.350
-2.217
.038
.902
1.109
.023
.536
3.350
.003
.879
1.138
a. Dependent Variable: investment
19
