| An increasingly more people gave realized the significance that equity structure imposes on management structure in listed companies, the cornerstone of stock market. En china, most of the listed companies stem from restructured state-owned enterprises. However, what on earth is the relationship between equity structure of a listed company and its performance? How to improve the equity structure of a listed company? In this paper, all the listed companies in Shanghai and Shenzhen in year 2000 (some exceptional cases have been left out) being used as samples, relevant counter researches on equity structure and a company's performance are done, the relations between the two are examined, and proposals on improving equity structure are explored.Serving as a theoretical preparation, chapter one makes a brief introduction about the theoretical background of relevant researches on the relationship between equity structure and a company's performance. As mentioned above, most of Chinese listed companies result from restructured state-owned enterprises. Furthermore, a policy called "separation of two rights" (separation of proprietary right and operating right) is adopted in managing state-owned enterprises. Therefore, a brief outline about the characteristics and prerequisites is given of the principal-agent theory, which functions as a tool for analyzing the theory of "separation of two rights".Major characteristics of principal-agent theory are as follows: 1.Entrusted agent relation is, above all, a relation of economic interests. 2. Entrusted agent relation also features as a contractual relation. 3. Entrusted agent agreement is incomplete. 4. Any entrusted agent agreement should be feasible so as to make it possible for the agent to act on the client's will.To make a valid principal-agent theory, five prerequisites are essential: 1. Both the client and the agent should have legal capacity to negotiate and sign an agreement. 2. The client should have possession. 3. The agent should enjoy a competitive edge in collecting information. 4. Both the client and the agent are confronted with risks brought about by market uncertainty, and the information the have should be unparallel. 5. Either the client or the agent can freely withdraw from the agreement provided that one side breaches the contract.Chapter two describes the current situation of equity structure in Chinese listed companies. First of all, it introduces the definitions, constitutions and characteristics of state-owned share and legal- entity-held share, lists the differences between listed companies and non-listed companies, and analyses the defects in management structure of Chinese listed companies:1 .Not having gone through the severe test of a market economy, Chinese listed companies have been suffering from a "congenital malformation" and a lopsided development since establishment.2.Listed companies can hardly set up an effective check & balance mechanism due to a deformative equity structure and an irregular way of increasing capital and appearing on the market. (1). In most listed companies, state-owned share far outweighother kind of shares in amount. Occupying an absolutely dominant position while being inflexible, state-owned share can control all organs of power in a listed company-shareholders' conference, board of directors, supervisory board and manager. (2). The prevailing of so-called "Internal staff control" phenomena drives the shareholders' conference in listed companies toward an inclination of "Incapability". The board of directors and the supervisory board are but two empty shells. Thus, a strange phenomena, ie self-selection, self-supervision and self-evaluation among major or dominant shareholders emerges and a check & balance mechanism essential for a listed company gradually loses its due function. (3). The profit-maximum objective of listed companies is distorted into an administrative one.3.There is commonly a lack of selecting and fostering mechanism for entrepreneurs in stock market and listed companies.
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