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.
