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Effect of Executive Ownership on the Relationship between Agency Cost and Equity Mispricing Vol. IV, No. IV (Fall 2019) 181 external. After that Mayers and Majlauf (1984) argued that there exists information asymmetry problem due to which capital market is imperfect and both sources of finance are not perfect alternatives. The existence of asymmetry of information has become the reason of agency problem, where executives and stockholders have conflict of interests. To eradicate such type of conflict of interests among agents and owners, firm faces agency costs to line up objectives of both parties. Therefore, the purpose of current work is to shed light on the impact of agency costs on stock mispricing especially in context of emerging economy such as Pakistan. This study contributes in various ways. Firstly, for academicians it provides a baseline on the linkage among agency costs and equity mispricing by enriching the existing literature in emerging economies context such as Pakistan as this, study is conducted with empirical evidence in an emerging economy such as Pakistan. Various studies have been conducted on equity mispricing and investment however those are not sufficient and cannot be summed up to developing economies on the grounds that each nation and its budgetary markets have their own capital structure. Furthermore, Pakistan is a developing nation so it is essential to determine the influence of agency costs on equity mispricing for firms listed on the Pakistan Stock Exchange. Pakistani markets have dissimilar ownership structure and corporate financial mechanisms and its dynamics are different from developed markets. Secondly, it provides guidelines for practitioners that how agency conflict can be minimized by offering equity based compensation instead of cash based incentives and ultimately market value for the firm can be maximized. Likewise, empirical studies are conducted in established countries only, and evidence from developing market especially in Pakistan is limited.