Mixed ownership reform and corporate tax avoidance: Evidence of Chinese listed firms

• Published in: Pacific-Basin finance journal 2021-10, Vol.69, p.101648, Article 101648
• Main Authors: Wang, Wei, Wang, Hua, Wu, Ji (George)
• Format: Article
• Language: English
• Subjects: China; Corporate tax avoidance; Mixed-ownership reform intensity; State-owned enterprises
• ISSN: 0927-538X; 1879-0585
• DOI: 10.1016/j.pacfin.2021.101648

We find a significant negative relationship between a firm's mixed-ownership reform intensity ratio and the degree of corporate tax avoidance in China between 2003 and 2018. The path analyses demonstrate our finding is through the channel of a firm's financial constraints and analysts' earnings forecast dispersion. Furthermore, our main results are more pronounced for firms with a high level of media coverage and located in a region of weak tax enforcement or high willingness of government decentralisation. Finally, our results remain significant after alleviating a series of endogenous tests and robustness tests. We contribute to the literature to understand the causes of a firm's tax avoidance behaviour and the consequence of the mixed-ownership reform in China. •A significant negative relationship between the mixed-ownership reform and SOEs corporate tax avoidance in China.•The negative relationship is through the channel of a firm's financial constraints and analysts' earnings forecast dispersion.•Results are pronounced for firms located in a region of weak tax enforcement and high government decentralization.