Acta Universitatis Danubius. Œconomica, Vol. 8, No. 3

Abstract

The objective of this study is to determine the significance of the tax
benefits in explaining observed leverage ratios amongst firms in Nigeria. To
investigate how the results of previous studies and traditional theories on financial
leverage compare with the real situation in the Nigeria corporate environment. The
differential impact of tax treatment of debt on corporate financial policy in
developed countries. The parameters of debt ratios are estimated by fitting multiple
linear regression after this equation- l=f (τ r, s, v, π, m, c, σ). Our dataset covers a
cross-section of 60 quoted firms from Nigerian stock Markets over a ten year
period (1996-2005). The tax benefit of debt approximately equals fifteen (15)
percent of firm value. However, this tax advantage does not seem to explain
observed debt ratios since we could not obtain a statistically significant coefficient
for the marginal tax rate. The provision of empirical evidence in support of known
theories.