This study explores the effect of corporate governance attributes on cash holdings of non-financial companies in Pakistan during 2013–2024. This study uses the competing theoretical frameworks of agency theory and the risk management view to discuss whether governance mechanisms limit managers’ discretion in liquid asset management or allow firms to create precautionary buffers. This study uses a multi-method approach to achieve its objectives. Pooled ordinary least squares, fixed effects, and random effects models of baseline estimations indicate that cash holdings have a negative relationship with board independence, audit quality, audit independence, and managerial ownership, in line with the agency cost perspective. Quantile and inter-quantile regression tests reveal the distributional differences, showing that the impact of governance variables is more significant in the upper quantiles of the cash distribution, implying the greater applicability of governance variables in areas where agency risks are most acute. Conversely, the positive correlation between audit quality and cash at the high quantile level is conducive to governance’s complementary role in facilitating strategic liquidity. Moreover, fuzzy-set qualitative comparative analysis (fsQCA) indicates that excessive cash holdings are not a product of single governance failures but rather a mixture of particular combinations of weak boards and audit independence roles, usually combined with symbolic governance routines. The results of the study provide support for the relevance of governance complementarities as well as the usefulness of employing mixed methods to measure average effects and identify causal asymmetries
Sultan et al. (Tue,) studied this question.