Abstract: Using a sample of A-share listed private enterprises in China from 2008 to 2019, this paper studies the effect of state-owned capital on tax avoidance under the background of mixed ownership in private enterprises. The results show that the participation of state-owned capital reduces the level of tax avoidance in private enterprises, and the reduction is more significant in private enterprises registered in provinces with a lower level of financial marketization or a higher level of tax enforcement intensity. This paper also finds that state-owned capital reduces the level of tax avoidance via alleviating financial constraints of private enterprises. Further research shows that when the proportion of state-owned equity is higher, the reduction effect is more pronounced. Analysis on economic consequences shows that the participation of state-owned capital weakens the negative effect of tax avoidance on private enterprise and promotes firm value. This paper enriches the understanding of state-owned capital’s participation in private enterprises from the perspective of tax avoidance, and provides empirical support for the vigorous promotion of mixed ownership in private enterprises, which has important theoretical meaning and practical value.

Key words: mixed ownership, private enterprises, tax avoidance, financial constraints, firm value