RESEARCH
METHODOLOGY
The methodology to be adopted in
this research work is ordinary least square (OLS) techniques. Ordinary least
square techniques is adopted because of its simplicity and estimates obtained
from this procedure have optimal properties including linearity, unbiassedness and
minimum variance (Koutsoyianis 2001:p48)
MODEL
SPECIFICATION
To analyze the impact of taxation on
foreign direct investment (FDI), Foreign Direct Investment will be used as the
dependent variable while taxation (CIT) will be used as independent variable.
The functional relationship between
the two variables can be stated thus:
FDI = (CIT)
Where:
FDI
= Foreign Direct Investment
F
= functional notation.
CIT
= Company Income Tax.
The
OLS linear regression equation based on the above functional relations is
FDI
= b0 + b1 CIT + U
Where
FDI and CIT were previously defined
b0 = constant term of the
regression equation
b1 = Regression coefficient of
company income tax
Ui = random term representing omitted variables and
errors in the dependent variables.
The signs of the parameters based on prior economic
theory, is b0>0. This implies that company income tax impact
significantly on foreign direct investment.
METHOD
OF EVALUATION
Adeleye (2002:p19) observed that the
essence of evaluating result is to determine the hypothesis that is to be
rejected or accepted. To evaluate data, the computed coefficient of
determination, R2 will be used to test the goodness off it or the
explanatory power of the dependent variable. The value of R2 lies between
0 and 1 i.e. 1k R2 <1. The closer it is to the better the
goodness of fit and the farther it is from one, the worse the goodness of it.
The students t-test is used to test
for the statistical significance of the regression coefficient. The observed t-ratio
(t*) will be compared with the critical t-ratio. For a two tail test at 5%
level of significance with n-k degree of freedom where “n” is the number of
observation, and “k” the number of parameters to be estimated.
If the observed t-ratio (t*) is greater
than the critical t-ratio at 5% level of significance, e reject the null
hypothesis and accept the alternative hypothesis, vice versa.
The F-ratio will be used it test for
the significance of the entire regression plane and the stability of regression
coefficient.
The observed f-ratio (f*) will be
compared with the theoretical f-ratio at 5% level of significance and with v1 =
k-1 and v2=N-k.
If F* > f0.05. We
reject the null hypothesis and accept the alternative hypothesis, that the
regression is significant and vice versa.
DATA
REQUIRED AND SOURCES
The data used in the regression work were secondary
data. The were time series data on foreign direct investment and taxation (CIT)
they were collated from the following under listed sources:
1.
CBN Statistical
Bulletin
2.
Federal Office of
Statistics
3.
CBN economic and
financial review, 2005.
REFERENCE
Koutsoyianis,
A. (1997) theory of Econometric, (London: Macmillan
Press)
Osuala,
E. C. (1993), Introduction to Research Methodology 3rd edittion Onitsha: African Fed. Publisher
Ltd)
Pindyze R. S. (1985), Econometric model and economic forecast Singapore: MCgraw Hill Book)