This paper examines the impact of disproportional ownership on true firm performance when firm performance is adjusted for the effect of earnings management. Results from regression analysis indicate that the separation between control and cash flow rights of family/or individual-controlled listed firms in China decreases firm performance when firm performance is adjusted for the effect of earnings management than when firm performance is measured as reported performance. The results also show that separation is significantly positively related with true firm performance in firms with low cash flow rights concentration. The main disproportional ownership mechanism, pyramidal structures is also investigated in the paper. We find that pyramidal structure substantially increases earnings management and hence reduces true performance while it constrains earnings management significantly in low cash flow concentrated firms. Adjusting for the impact of earnings management substantially increases the measured importance of disproportional ownership structures of controlling shareholder on firm performance.