Impact of Block Ownership and Contestability on Leverage; An Empirical Analysis of Manufacturing Companies Listed on PSX

The research investigates the influence of the predominant block holder and contestability on corporate leverage. The study regards book leverage as the dependent variable. Shareholders possessing 10% or more of voting rights are classified as independent variables. Additionally, for the contestability effect, coalitions are regarded as independent variables due to their positive correlation with contestability. Six control variables were considered Size, Age, Tax, Asset Tangibility, ROA, and NDTS. The study indicated that leverage and the largest block holder were negatively related. This means that the biggest block holders will want less debt because they have more voting power. The results showed a positive link when the second and third largest owners challenged the largest block holder. This suggests that when the second and third largest shareholders are present, the level of debt in a company goes up. The sample time frame is from 2016 to 2021. We got data from the Pakistan Stock Exchange website for 146 companies in the manufacturing industry in Pakistan.