Basing on agency theory this empirical study explores the effect of corporate governance on managerial cash holding decisions. For the sake of a testable propositions concerning the determinants of corporate cash holdings, different theories of corporate cash holdings are reviewed (pecking order theory, trade off theory and free cash flow theory).The investigation is performed using panel data procedure for a sample of 138 firms listed on Karachi Stock Exchange during 2008-12.The results suggest that cash flow is the only variable which is statistically significant and positively related to cash holdings. Alternatively, liquidity, leverage, bank borrowing variability of cash flow is significantly and negatively related to cash holdings. Dividend, market-to-book ratio and ratio of non-executive to total directors are positively whereas firm size family dummy and CEO duality are negatively related to cash holdings but the relationships are insignificant. In particular managerial ownership (MAN) and MAN3 is negative but significant however MAN2 is positively related to cash holdings. These variations in sings indicate the non-linear relationship between managerial ownership and cash holdings. To author knowledge this is first study that explores corporate governance as an important determinant of cash holding.