Tax Laws and Capital Structure Decisions of Listed Oil and Gas Companies in Nigeria

Abstract

This study assessed how tax regulations influenced capital structure (CS) decisions made by listed oil and gas (O&G) firms in Nigeria between 2013 and 2023. It focused on six O&G firms listed in Nigeria as of December 31, 2024. Data obtained from the financial reports of the sampled entities for the period were analyzed using a panel data regression method with a fixed effect, as determined by the Hausman test. The analysis indicated that company income tax (CIT) had a coefficient of 0.8349 and a p-value of 0.7714 with respect to the equity-to-total capital ratio (E/TC). Petroleum profit tax (PPT) had a coefficient of 2.1979 and a p-value of 0.1300 with E/TC, while education tax (EDU_T) showed a coefficient of -9.1376 and a p-value of 0.0054 with E/TC. The analysis also revealed that CIT had a coefficient of 1.5684 and a p-value of 0.7366 in relation to the debt-to-total capital ratio (D/TC). PPT had a coefficient of 3.5405 and a p-value of 0.1328 with D/TC, while EDU_T exhibited a coefficient of -14.7162 and a p-value of 0.0057 with respect to D/TC. The results showed that while CIT and PPT have positive but statistically insignificant relationships with both D/TC and E/TC, EDU_T has a significantly negative relationship with both capital structure proxies. These findings suggest that higher education taxes constrain financial flexibility and discourage both equity and debt financing in the sector. The study concluded that tax policies particularly the education tax significantly influence corporate financing strategies in Nigeria’s O&G sector. It recommends that policymakers revise education tax policies to reduce the financial burden on O&G companies, thereby promoting a more balanced and growth-oriented capital structure