By employing unbalanced panel data during 2002-2006 in Chinese electricity machinery industry and metallurgical industry,this study measures the listed companies' technical efficiency based on stochastic frontier model,then examines the linkage between managerial incentive and firm efficiency by controlling the firm's size and financial leverage,external and internal incentives.Firstly,the evidence shows that the man- agerial incentive reflected by managerial stock can significantly increase fir...