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This study aims to examine the effect of corporate cash holdings on financial performance. Additionally, it investigates the moderating effect of corporate governance and family ownership on the link between corporate cash holdings and financial performance.

This study uses secondary data regarding the sample of 81 firms listed in the Karachi Stock Exchange (KSE) 100 index from 2011 to 2020. The present study applies the system generalized method of moments (GMM) to estimate the dynamic financial performance models.

The findings reveal that corporate cash holding is significantly positively linked with financial performance. Further, the findings indicate that the board size and chief executive officer (CEO) duality strengthen the association between cash holdings and financial performance, whereas CEO gender and family ownership weaken the positive effect of cash holdings on financial performance. Furthermore, the findings suggest that Covid-19 significantly negatively affected the financial performance of Pakistani firms.

The findings have several policy implications. First, policymakers need to increase the board of directors' role in observing the firms' cash-holding behaviour. Policymakers may also formulate policies providing stronger protection for minority shareholders from majority shareholders.

To the best of the authors' knowledge, this study is the first to examine how corporate governance and family ownership influence the link between corporate cash holdings and financial performance in the context of Pakistan.