The split share structure reform removed a significant market friction in Chinas capital markets by allowing previously non-tradable shares to be freely tradable at market prices.Such a reform reduces the agency conflict between controlling shareholders and minority shareholders as the former now care more about stock prices.We find that state-owned firms, but not non-state-owned firms, significantly increase their tax avoidance activities after the reform.We attribute this differential effect to the dual role of the government as state-owned firms controlling shareholder as well as the tax claimant.Further, this effect is more pronounced for state-owned firms that are more likely to be influenced by the government.Finally,the reform reinforces a positive association between tax avoidance and firm value.Overall, our study suggests that when controlling shareholders are more concerned about stock prices, state-owned firms engage more in tax avoidance activities to enhance firm value.