Anti-takeover Provisions and Tax Avoidance

• In Event: Tax Avoidance

Abstract

We examine the effect of corporate anti-takeover provisions on corporate tax avoidance. Based on a sample of Chinese A-share listed firms with hand-collected anti-takeover provisions between 2009 and 2018, we find that the strength of corporate anti-takeover provisions is positively associated with corporate tax avoidance, and that the positive relation is more pronounced for Nomination Rights and Staggered Board provisions, for Delay group of provisions, and for firms with dispersed ownership, poor board monitoring, low media attention, and weak legal environment. Our findings are consistent with the managerial entrenchment hypothesis and suggest that corporate anti-takeover provisions weaken the governance control of the takeover market and thus induce self-interested managers shielded from takeover threat to take aggressive tax avoidance.

Authors

• Zhiying Hu, University of Science and Technology

• Xuemei Zhang, University of Science and Technology

• Liya Hou, St. Cloud State University