OKAFOR, Victor Ikechukwu
Department of Accounting
Michael Okpara University of Agriculture, Umudike
vi.okafor@mouau.edu.ng
ARIWA, Florence Onyinye
Department of Banking and Finance
Michael Okpara University of Agriculture, Umudike
florony4j@gmail.com
ONODI, Benjamin Ezugwu
Department of Accounting
Michael Okpara University of Agriculture, Umudike
benonodi@yahoo.com
ABSTRACT
Target dividend payouts have traditionally been explained by taxes and functions of capital providers’
decisions, as well as profits made by the banks. This has affected both fund providers, as well dazzled
managers’ attempt to make dividend payment policies. As a result, it is important to study how taxation
relates to dividend policy and how leverage affects the relationship between taxes and dividend policy in
contemporary Nigerian economy. Thus, this study evaluated the relationship between corporate tax and
dividend policy of listed deposit money banks in Nigeria with consideration of leverage structure. The study
adopted panel regression technique to examine data from 9 banks that are purposively selected out of 14
listed deposit money banks on the Nigerian Exchange Group as at 2023. The study revealed that company
income tax has a positive and significant relationship with dividend per share of listed deposit money banks
in Nigeria while, deferred tax has a positive but insignificant relationship with dividend per share of listed
deposit money banks in Nigeria. Further, the study found that leverage ratio has no significant effect on the
relationship between taxation (company income and deferred tax) and dividend per share of listed deposit
money banks in Nigeria. Thus, the study recommends that bank board members, managers, and
shareholders should review their dividend policy in light of the study’s findings. They should assess whether
adjustments need to be made to optimize the benefits of company income tax on dividend payments. To do
to this, they should consider factors such as tax planning, cash flow management, shareholder expectations,
and long-term financial sustainability of the banks other than just paying cash dividends.
Keywords: Tax preference theory, dividend payment, company income tax, and deferred tax.