This paper first analyses the heterogeneous effects of intermediate and final goods trade liberalisation on firms’ managerial efficiency by incorporating the agency problem between owners and managers into a two-country general equilibrium model. With a non-zero agency cost, owners cannot perfectly monitor managers’ behaviour. The“cost effect”and the“terms-of-trade effect”of intermediate goods liberalisation reinforce managers’ private incentives, while the impact of final goods liberalisation on managerial efficiency depends on the relative strength of the“beggar-thy-neighbour effect”and the “terms-of-trade effect”. Empirically, this paper uses firm-level data from China to construct valid indicators for managerial efficiency, which not only confirm that liberalisation of intermediate goods is significantly reduced, while liberalisation of final goods enhances managerial efficiency, but also reveal the mechanism by which trade liberalisation affects managerial efficiency through profits and prices. This study theoretically and empirically investigates the managerial efficiency decisions in an open economy, which has policy implications for understanding the corporate governance role in trade liberalisation, improving firms’ managerial efficiency, and strengthening the foundation of microeconomic growth.