Abstract: The specific political and economic system in China decides state shareholders have a significant impact on the corporate governance and management activities of invested companies. Taking the heterogeneity of shareholders as the starting point, the article takes the data of Chinese A-share listed companies from 2011 to 2017 as a sample to study the correlation between internal control, equity capital cost and corporate performance in the context of mixed ownership economy. The empirical results show that the quality of internal control is positively correlated with corporate performance under the condition of other conditions remain unchanged, and the positive correlation between them is more significant in non-state shareholder holding companies; the cost of equity capital is negatively correlated with corporate performance, and the negative correlation between them is more significant in the state-holding companies; the high-quality internal control will enhance the negative correlation between the cost of the equity capital and the performance of the company, and the negative correlation enhancement is more significant in the state shareholder holding company. The conclusions show that the mixed ownership reform needs to solve the problem that the significant degree of negative effects of state-controlled enterprises is higher than non-state-controlled enterprises′.

Key words: company performance, cost of equity capital, internal control, shareholder heterogeneity, mixed ownership