Based on the sample of Listed Companies in China, studying the impact of margin trading on total factor productivity. The empirical results show that the total factor productivity of enterprises has increased significantly after they become the subject of margin trading, which shows that margin trading, as an external governance mechanism, has promoted the TFP of enterprises significantly. Further research shows that the margin trading mechanism promote the TFP of non-state-owned enterprises, high-tech enterprises and less capital constraints enterprises more significantly. And through the study of the difference between financing mechanism and short-selling stocks, it shows that both mechanisms promote the TFP of enterprises. The results show as follows the margin trading mechanism can reduce the information asymmetry within the enterprise, strengthen the supervision of the capital market, and improve the total factor productivity of companies.