Mian Sajid NazirHaris Khursheed SaitaIftikhar AhmadMuhammad Musarrat Nawaz2012-11-082012-11-082012Science Series Data Report Vol 4, No. 6;Jun 2012, 79-94https://escholar.umt.edu.pk/handle/123456789/634This study tests the agency cost hypothesis that use of leverage decreases agency cost. This relationship has been tested using data of 265 non-financial companies listed on Karachi stock exchange during the period of 2004-2009. General & admin expense to sales ratio is used as proxy to measure agency cost. Total, short term, long term and contractual debt ratios have been used separately to test agency cost hypothesis. The results of pooled and panel regression models show that general &admin expense ratio is negatively related to all four leverage ratios. Thus, this study givesevidence in support of agency cost hypothesis that use of debt in capital structure reduces agency cost.enDebt ratioFinanceLeverageArticle