Anti‐Takeover Provisions and Corporate Tax Avoidance

We examine the impact of anti‐takeover provisions (ATPs) on corporate tax avoidance in firms listed on Chinese A‐share markets, using rule‐based textual analysis over 2009–2023. In the absence of a unified anti‐takeover statute in China, legal reforms since 2006 have expanded corporate bylaw autonomy, enabling managers to adopt charter‐based ATPs as a form of ‘private ordering’. Consistent with the managerial entrenchment hypothesis, we find a robust and positive association between ATP strength and corporate tax avoidance. This relationship is driven by three primary mechanisms: reduced takeover‐market pressure, diminished analyst coverage and weaker internal controls. We further demonstrate that managers in high‐ATP firms leverage tax savings to increase perk spending beyond expected levels, suggesting that ATPs facilitate the extraction of private benefits. Cross‐sectional analyses reveal that this association is more pronounced in firms with weaker tax enforcement, higher operating risk, business‐group affiliation, fewer legally trained directors, higher information opacity and lower institutional ownership. The results shed light on the governance implications of ATPs and their significant role in shaping corporate tax management strategies in emerging markets.