This study empirically analyzes the relationship between corporate governance and cash holdings in Korea, a representative emerging market, using its data of listed firms with interests in contradictory recent research results concerning corporate governance and cash holdings. The variables used as proxies to represent types of corporate governance are very important. Unlike previous studies, this study uses the independence of boards as a proxy variable for corporate governance level because boards play a crucial role in monitoring management and simultaneously implementing decision-making processes. In addition, a principal decision-making process carried out by a board aims to protect investor profit and enhance firm value by efficiently allocating firm resources, and previous research has emphasized that independence is important to boards' effective functioning. To measure board independence, we use the ratios of independent and non-independent outside directors used in previous studies, drawing on a very large amount of data gathered on the individual outside directors of Korean listed firms for the 2001-2010 period. Based on these data, the ratios of independent and non-independent directors are extracted after classifying two types of outside directors by setting up more stringent criteria, which include the educational and vocational backgrounds of individual outside directors as well as their legal qualifications. In this way, the study considers the importance of independent outside directors by empirically analyzing the effect of each ratio, and highlights that board independence originates with independent outside directors. More specifically, we provide empirical evidence in relation to the following three main questions. (1) Does the amount of cash holdings differ according to the degree of corporate governance (board independence) in Korean listed firms? (2) Are cash resources efficiently allocated according to the degree of corporate governance (board independence) in Korean listed firms? (3) Does the value of cash holdings differ and consequently affect firm value according to the degree of corporate governance (board independence) in Korean listed firms? The empirical results can be summarized as follows. First, when a board becomes more independent, the firm's cash holdings decreases, while cash outflow increases. As the board's independence grows, it is able to more efficiently control managers' incentives to accumulate cash resources internally. Second, as board independence increases, high-growth opportunity firms may increase their investment options, while low-growth opportunity firms may increase their dividend options. Our analysis of the interaction between board independence and cash holdings in investments and dividends, according to growth opportunity, indicates that its effects on dividends were significant, but its effects on investments were not. In firms with high growth opportunity, as the ratio of non-independent outside directors increases, internally held cash is not spent on investments but on dividends, which confirms that the firms' growth opportunities are not being used efficiently. In contrast, in firms with low growth opportunity, as the ratio of independent outside directors increases, managers are prohibited by the board from spending internally held cash, which instead is likely to be spent on dividends. Finally, firm value increases in firms with higher levels of board independence and more cash holdings. In other words, as board independence increases, investors value cash holdings more highly. This indicates that the value of cash holdings differs according to the type of corporate governance. Our findings confirm that the relationship between board independence and cash holdings in Korea, an emerging market, is different from that in the U.S., a well-developed market. More importantly, this study enables us to understand how good corporate governance enhances firm value. It shows that in firms with high board independence, the market estimates that the monitoring function of the board works effectively and that cash holdings are not exploited for managers' private benefit; instead, they are allocated efficiently according to the firm's characteristics, such as to growth opportunities. This market view is then reflected in the valuation of cash holdings, which in turn increases firm value.