The study examines the effect of low cash and debt (LCD) on corporate governance (CG) and whether country characteristics matter more for CG of LCD firms than other firms. The cash value approach can address this research question given the proven positive link between CG and cash value. A review of comprehensive firm-level data across 88 countries from 1996–2019 firmly reveals better CG for LCD firms than for other firms. Additionally, country characteristics prove to affect CG particularly for LCD firms. Specifically, CG of LCD firms advances when economic or financial development improves, financial system is market-based rather than bank-based, shareholder protection improves, or national governance strengthens. As for other firms, CG is less influenced by country characteristics. Overall, the study contributes to existing research by showing that LCD positively affects CG and LCD firms can better capitalize on favorable external environment to improve CG than other firms. Display omitted •The study explores how low cash and debt (LCD) influences corporate governance (CG), factoring in country characteristics.•The results strongly indicate that CG is better for LCD firms than for other firms.•CG is more influenced by country characteristics for LCD firms than for other firms.•LCD firms can better capitalize on favorable external environment to improve CG than other firms.•The documented mutually reinforcing link between country characteristics and CG is strongly supported.