This paper present a theoretical model to disentangle the entrenchment and incentive effects with the ultimate controlling shareholders in pyramidal ownership.The finding of the paper is that the divergence of the voting rights and cash flow rights in pyramidal ownership is not the only incentive to the expropriation of minority shareholders,while both the voting right at different levels and the trade-off of costs and benefits of ultimate controlling shareholder have more impact on the agency relationship with the minority shareholders,which gives more fully explanations of the controlling motives of ultimate shareholders.This paper empirically examined the theoretical analysis conclusions.