EFFECT OF CAPITAL INTENSITY AND EFFECTIVE TAX RATE ON FINANCIAL PERFORMANCE OF LISTED INDUSTRIAL GOODS FIRMS IN NIGERIA

Abstract

Achieving an excellent financial performance is a primary goal for every management team due to its importance in establishing a solid firm structure and facilitating growth. However, several factors consistently hinder the attainment of this objective, resulting in adverse effects on a firm's performance and financial success. This study examines the effect of Capital intensity and effective tax rate on the financial performance of listed industrial goods firms in Nigeria. To achieve these objectives, correlational panel research design, the study gathered data from eleven industrial goods firms over a twelve-year period (2012-2023), and data were analysed using E-Views version 12. The findings reveal that capital intensity has positive and significant effect on return on capital employed while effective tax rate showed a negative and insignificant effect on return on capital employed of listed industrial good firms in Nigeria. The study concludes that firms with higher capital intensity are better positioned to leverage their assets, manage risk effectively thereby leading to better financial performance, while lower effective tax rate using tax planning strategies which helps lower tax burden will lead to improved financial performance.