Impact of Corporate Governance on Effective Corporate Tax Rates Among Listed Firms in Kenya

Peter Rawlings Osebe, Joseph Kiprono Kirui, Isaac Kiprotich Naibei


Corporate tax is not only an important source of revenue to governments around the world but is also used to achieve a number of fiscal objectives. On the other hand, Corporation tax represents a significant expense to companies thereby impacting on major corporate decisions. Understanding factors that affect the effective corporate tax rates is therefore important not only to corporations but also to governments and other policy makers. Despite the well documented corporate tax leakages across the world, widening budget deficits and ballooning public debt in Kenya, limited studies have been conducted to investigate the impact of corporate governance on effective tax rates among the NSE listed firms. The purpose of this study was therefore to investigate the impact of board size, board independence, board gender diversity and corporate ownership structure on effective corporate tax rates among listed firms in Kenya between 2011 and 2017. The study employed longitudinal research design. A sample of 40 firms were purposively selected from the 67 listed firms in Kenya as at 31st December, 2017.Data was extracted from the published financial statements of the sampled firms. Data was analyzed with the aid of STATA software. The findings of the study show that board size, board independence and board gender diversity has a positive and significant effect on effective tax rates. On the other hand, ownership structure has a negative and significant effect on effective tax rates. The study therefore concludes that corporate governance has a significant impact on effective tax rates among listed firms in Kenya and recommends that policy makers, investors and corporate executives consider this fact when making their tax policies and decisions.

Keywords: Corporate governance, Effective tax rate, listed firms, Kenya.

DOI: 10.7176/RJFA/10-18-04

Publication date:September 30th 2019

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