Two main tests were used to test the presence of multi correlation among the regresses. The results of the two tests are reported in figure 2. Virtually all the variables are not highly associated. Because of the high level of correlation between Cash Conversion Cycle (CCC) and Creditors Collection Period (CCP), the stepwise reversion method was accepted. This gave rise to two models: model 1 which accepted CCC but included CCP and DCP; and model two which only used CCC. Then the variance inflation factors for the two representations were appraised. The variance inflation factors means 1.50 and 1.43 correspondingly, fall within the standard for accepting that the regresses are not highly connected and therefore the presence of multi correlation is not important.
Based on the arithmetical analysis of expressive, connection and deterioration, it is observed that both Finnish manufacturing and trading firm's growth opportunities do not show the statistically supportive evidence in its association with the cash holdings. Empirical statistical tests do not provide clear relationship on this determinant with cash holdings. The findings are different from the empirical studies of Kim et al (1998), Opeler (1999), Ferreira and Vilela (2004), Ozkan and Ozkan (2004), Teruel and Solano (2008), in which the growth opportunities have strong influences on cash holdings, however, in Niskanen and Niskanen (2007) empirical study of Finnish micro and small firms‟ growth opportunities are found not to be a statistically significant factor of cash holdings.
The statistic tests reveal that the Finnish manufacturing and trading firms‟ firm size is strong statistically significant and negatively related with the cash holdings in regression test. Furthermore, in correlation matrix the Finnish trading firms has the strong negative statistically significant relationship with the cash holdings, but not in Finnish manufacturing firms. Univariate test also proves that the firm size of the Finnish trading firms decreases monotonically. Therefore, the relationships between the both Finnish manufacturing and trading firms‟ firm size and corporate cash holdings is confirmed with the previous empirical studies by Kim et al (1998), Opeler (1999), Ferreira and Vilela (2004), Niskanen and Niskanen (2007). The smaller Finnish firms hold more cash than larger firms which supports the trade-off theory indicating a negative relation between the size and cash holdings.
Leverage of Finnish manufacturing and trading firms is negatively related with the cash holding. This result is not as predicted and is in line with the previous empirical studies Opeler et al (1999), Ferreira and Vilela (2004), Ozkan and Ozkan (2004), Teruel and Solano (2008) that leverage increase as cash holdings also increase. Either manufacturing or trading firms‟ the results are statistically significant in the regression model. However, in the correlation matrix both Finnish manufacturing and trading firms have strong negative relationship with the corporate cash holdings and statistically significant. In test, it further proves that Finnish trading firms‟ leverage decrease as level of cash increases. There is not sufficient evidence to support the expectation and indicate the Finnish manufacturing and trading firms‟ relationship with cash holdings. However, the findings is confirmed with the Niskanen and Niskanen (2007) studying the Finnish SME firms and Teruel and Solano (2008) researching the Spanish SME firms that cash holdings increase, leverage decreases.
Manufacturing firms‟ bank debt is negatively related with the cash holdings as predicted and statistically significant at 1% level in regression. The findings is in consistent with the previous researches Ferreira and Vilela (2004), Ozkan and Ozkan (2004), Niskanen and Niskanen (2007), Teruel and Solano (2008). In correlation matrix, it is further proved that Finnish manufacturing firms‟ bank debt has negatively and statistically significant relationship with the cash holdings. Both Finnish manufacturing and trading firms‟ cash flow have positive relationship with the cash holdings as expected and the statistics significant are at 1% level in regression, in correlation matrix and univariate tests. The findings is in consistent with the previous empirical researches Opler et al (1999), Ferreira and Vilela (2004), Ozkan and Ozkan (2004), Teruel and Solano (2008) Riskier cash flows make the firms hold more cash. As Ozkan and Ozkan (2004) point out "The greater the firm‟s cash flow variability, the greater the number of states of nature in which the firm will be short of liquid assets"
Both Finnish manufacturing and trading firms‟ liquid asset are negatively associated with the cash holdings as predicted and Finnish trading firms‟ result in regression is statistically significant at the 1%, but manufacturing firms‟ regression result is not significant. In correlation matrix, manufacturing and trading firms‟ liquid asset both negatively related with the cash holdings with statistical significant bit over 5% and at 1%. The findings suggest that liquid asset is considered as the substitute for cash in terms of trading firms. The result is confirmed the previous studies Opler et al (1999), Ferreira and Vilela (2004), Ozkan and Ozkan (2004), Teruel and Solano (2008), but is on contrary to the findings from small and micro Finnish firms‟ study made by Niskanen and Niskanen (2007). Inventory of manufacturing and trading firms have a negative relationship with cash holdings which is in line with the previous studies Capkun & Weiss (2007), Abel (2008). However, the statistical significant of manufacturing firms is reached to 1% level of absolute value but not in trading firms. In correlation matrix the trading firms show more strong negative relationship with the cash holdings with absolute value at 1% but manufacturing firms at 10%.
It is reported in previous empirical studies that precautionary motives are supportive to explain the corporate cash holdings. (Opeler et al (1999), Ferreira and Vilela (2004), Bates (2006,) Capkun & Weiss (2007)) Bates et al (2006) argue that "average cash ratio increase over the sample period because firms changes, their cash flow becomes riskier, they hold fewer inventories and accounts receivables, and are increasingly R & D intensive. The Precautionary motive for cash holdings appears to explain the increase in the average cash ratio." The similar results are found in this empirical study for Finnish manufacturing and trading firms. Several statistically results provide evidence, as corporate cash holding increase, the cash flow also increases. Both of Finnish manufacturing and trading firms‟ inventory decrease as cash holdings increase, particularly observed in the manufacturing firms, but it is not supportive results found in regard to accounts receivable. Because both account receivable of manufacturing and trading firms are positively not negatively related with the cash holdings which are different from the expectation.
