Profit Incentive is the variable and this study provided to explain the relationship between ownership structure and corporate performance. According the literature review, our study concludes the most influential sources of profit incentive. Because of the different sources of profit incentive for directors and managers between ICT and non-ICT firms, we analyzed all samples, ICT firms and non-ICT firms. Taking endogeneity endogenous of ownership structure into consideration, we set up simultaneous models for ownership structure and corporate performance. The samples in the study were on the basis of listed manufacturing firms including 199 ICT firms and 280 non-ICT firms from 1994 to 2004. The empirical implications of this study showed that in non-ICT firms, by applying stock allotment or other ways to increase directorial and managerial ownership would improve corporate performance, the results were consistent with the convergence-of-interest hypothesis. On the other hand, profit incentive of stock bonus for managers in ICT firms would offer extra profit because managers would sell out some stocks when corporate performance is superior. However, based on comparative advantage rule, managers might take entrenchment actions after comparing the profit between to misusage of authority and reward of their salary or stocks.
