Management shareholding, which is an important method in solving principal-agent problem, is widely used in listed companies in our country as the progress of equity division reform. This dissertation studies the three theories related to management shareholding and corporation performance, which finds out: (1) based on human capital theory, management shareholding, in the form of stock option incentive, grants management the residual claim. Thus, a win-win situation is achieved for both

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... s and shareholders. (2) Based on principal-agent theory, management shareholding makes the utility function of management agree nearly with the objective function of shareholders, which effectively reduces the moral hazard of management. (3) La Porta et al. (1999) found out in the research that tracing enterprise's ultimate property owner with ultimate property right theory will help to better understand the relationship between ownership, control rights and corporate performance.