THE EFFECT OF TAX REFORM ON FINANCIAL REPORTING PRACTICES OF NIGERIAN COMPANIES

Abstract

This study examines the effect of tax reform on the financial reporting practices of Nigerian companies, with a specific focus on how changes in tax policies influence tax-related disclosures, compliance behaviour, and reporting transparency. Utilising a combination of quantitative and qualitative research methods, the study investigates whether recent tax reforms have improved the quality of financial reporting and whether this relationship is mediated by enhanced tax compliance. Drawing on data from 114 listed firms and applying hierarchical regression analysis, the results reveal that tax reforms positively influence financial reporting practices and that this effect is significantly mediated by firms’ tax compliance behaviour. Larger firms were found to benefit more from the reforms due to superior resources and internal governance systems, while no statistically significant variation was observed across industries. The findings underscore the importance of fostering tax compliance as a behavioural outcome of reform and offer policy recommendations aimed at supporting firms, particularly small and medium-sized enterprises (SMEs) in adapting to evolving tax obligations. The study contributes to the literature by empirically validating tax compliance as a key conduit through which tax reforms impact financial reporting in an emerging market context. Future research is suggested to explore long-term compliance behaviour and the role of digital technologies in sustaining financial transparency.