We examine the effects of chief executive officer (CEO) compensation incentives on cash holdings in Australia, augmented with Remuneration Act 2011, to better understand how the regulatory changes affect the incentives to align the interest of shareholders and managers. We use sample of top 300 ASX listed firms over the period from 2004-2015 (3600 observations). We find a negative relationship of equity incentives with cash holding after the promulgation of new regulatory change on compensation. We also find that the negative effect of regulatory changes is robust after controlling for corporate governance mechanism. In a finer analysis, we document that the negative relationship makes the managers incapable to extract rent in the presence of governance mechanism and independent remuneration committee. Furthermore, our evidence supports the precautionary motive of cash holding.