Abstract
We find that firms report significantly higher cash holdings in the 4th fiscal quarter, followed by subsequent reversal. Such a phenomenon cannot be explained by traditional determinants of cash holdings, calendar year-end effect, and the choice of fiscal year-end quarter. We identify real, financial, and timing apparatuses that firms employ to maneuver such cash hike within a fiscal year. Furthermore, the 4th-quarter cash hike appears to be more pronounced for informationally opaque firms requiring frequent access to external capital markets and for firms with reduced external monitoring and lower financial constraints. Our results suggest that within-year cash holding dynamics is important in fully assessing the liquidity and credit-risk situations of firms.
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