Effect Of Corporate Income Tax On The Profitability Of Manufacturing Firms Listed On The Ghana Stock Exchange

Abstract

This study delves into the intricate relationship between corporate income tax and the profitability of manufacturing firms listed on the Ghana Stock Exchange. It aims to provide insights into how corporate tax burdens impact firm performance, particularly within the context of the Ghanaian economy. Employing panel estimation techniques, including pooled OLS, fixed-effects model, and random-effects model, the research adopts a positivist approach and quantitative research design to achieve its objectives. The primary goals are twofold: first, to examine the direct influence of corporate income tax on firm profitability, and second, to explore the interactive effect of corporate tax and firm size on profitability. By analysing return on equity (ROE) as the measure of firm performance, the study seeks to uncover patterns and trends that shed light on the dynamics of taxation and its implications for business success in Ghana. The study's findings offer critical insights into the intricate relationship between corporate income tax and firm profitability among manufacturing firms listed on the Ghana Stock Exchange. A notable discovery is the significant negative association between corporate tax burdens and financial performance, highlighting the detrimental impact of higher tax rates on profitability. Additionally, the study uncovers a compelling positive marginal effect between firm size and corporate tax, suggesting that larger manufacturing firms are disproportionately affected by tax burdens. These revelations underscore the importance of tailored strategies and policy interventions to support manufacturing firms in navigating tax complexities while maintaining competitiveness. Overall, the study's insights contribute to informing policy decisions and industry practices aimed at enhancing the financial performance and sustainability of manufacturing firms in Ghana.