THE EFFECT OF INSTITUTIONAL OWNERSHIP ON TAX AVOIDANCE OF LISTED COMPANIES IN NIGERIA: THE MEDIATING EFFECT OF PROFITABILITY
This paper examined the direct and indirect effect of institutional ownership on tax avoidance of listed companies in Nigeria mediating by profitability. The sample of the study includes 121 companies listed on the Nigerian Exchange Group for twelve-year (2010-2021). Data was extracted from the annual report and accounts of the sampled firm. The descriptive statistics, correlation and Structural Equation Modeling (SEM) were used as techniques for data analysis while Monte Carlo model was used to determine the level of significance of the indirect effects. The study found that institutional ownership has insignificant effect on tax avoidance while the institutional ownership affects profitability of listed companies in Nigeria. Profitability has significant impact on tax avoidance. Finally, the relationship between institutional ownership and tax avoidance does not mediated by profitability. Hence, the study recommends among others that management of listed companies in Nigeria should adopt a series of measures to encourage institutional ownership to actively participating in corporate governance. Institutional investors and enterprises can be encouraged to obtain assistance from third-party tax consulting services. Furthermore, there should be an increase in institutional investor shareholding in order to align their interest with the interest of owners to reduce agency problems’ characteristics highlight which cause the division between management and shareholders in firms.
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