Income Tax Expense and Value Relevance of Selected African Listed Firms

Abstract

This study examined the effect of income tax accounting on value relevance of selected African listed firms. Concern has emerged that income tax accounting practices might impair the decision-usefulness of financial statements, leading to ineffective resource allocation, diminished investor confidence, and reduced market efficiency. The study adopted an ex-post facto research design and utilized secondary data from the annual reports of 528 firms listed in South Africa, Nigeria, and Kenya, applying multiple regression analysis. The findings revealed that current period tax expense (CPTE) was statistically insignificant in relation to value relevance (VR), with a coefficient of -0.0261, a t-value of -1.61, and a p-value of 0.109 (insignificant at the 5% level). However, prior periods' tax expense (PPTE) had a statistically significant negative effect on VR, with a coefficient of -0.000000907, a t-value of -2.82, and a p- value of 0.005 (significant at the 1% level). Based on these findings, the study recommended that policymakers enforce standardized tax-related disclosures across African countries to enhance financial transparency and comparability. Regulatory bodies were urged to mandate detailed reporting on income tax expenses to improve the decision-usefulness of financial statements.