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This study examines the effect of business group affiliations on corporate cash holdings and how political connectedness modifies the relationship between business group affiliations and corporate cash holdings.

The multiple ordinary least square regression with year dummies is used to estimate the effect of business groups on cash holdings. For moderating, the multiplicative term is used. The data from 252 non-financial firms listed on Pakistan Stock Exchange were collected for the analysis from 2010 to 2018.

The findings show that business group affiliations negatively affect corporate cash holdings, and political connection positively moderates this relationship. Business group firms that are politically connected hold less cash. The firm-specific factors such as leverage, size, cash flow, and dividend dummy also significantly affect corporate cash holdings.

The results imply that affiliated companies have lessened financing frictions and improved stability in their expected future cash flows. Moreover, the results indicate that political connection minimizes the opportunity and agency costs linked to cash holdings.

This study contributes to the existing literature by examining the moderating role of political affiliations on the relationship between business groups and cash holdings in the emerging market.

This study aims to examine the effect of corporate derivatives use on firm value and how the corporate governance index modifies this relationship.

The sample consists of 219 nonfinancial firms on the Pakistan Stock Exchange (PSX) from 2011 to 2019. The study used ordinary least square regression with year and industry dummies for estimations. Multiple estimation models such as fixed/random effect, Fama–MacBeth and two-stage least squares (2SLS) are used for robustness. Finally, the PROCESS macro tool is used to estimate the effect of moderating the role of corporate governance (CG) as robustness.

The findings show that derivatives use has an inverse influence on firm value. The firms did not use derivatives as a risk management tool but for speculation motives. However, the corporate governance index significantly weakens this relationship. However, strong governance forces the managers to use derivatives for hedging purposes. The firm-specific factors, including size, age, leverage, cash, financial distress cost, dividend and growth opportunities, also significantly influence firm value. The findings are robust to the other estimation models.

The findings indicate that emerging economies like Pakistan are more prone to agency problems. The strong corporate governance structure helps firms turn the speculative motive of derivatives use into hedging purposes and mitigate the agency issues.

This empirical evidence suggests that good governance structures can help improve the impact of derivative usage on firm value.

To the best of the author's knowledge, this is the first study that examines the conditional role of corporate governance on the derivatives–value relationship from the viewpoint of agency problem/speculative motive.