The Effect of working capital strategies on the speed of working capital adjustment

Articles in Press

Document Type : Original Article

Authors

Hassan zalaghi ¹

Abass Aflatooni ²

Mohammad Abdolnemeh Alyaseri ³

¹ Associate Professor, Department of accounting, Faculty of Economics and Social Sciences, Bu-Ali Sina University, Hamedan, Iran

² Associate Professor, Faculty of Economics and Social Siences, Bu-Ali Sina University, Hamedan

³ MSc student, Department of accounting, Faculty of Economics and Social Silences, Bu-Ali Sina University, Hamedan, Iran

10.22067/ijaaf.2026.98751.1659

Abstract

This study aimed to determine the effect of working capital strategies on the speed of working capital adjustment in Firms listed on the Iraqi Stock Exchange (ISX. (The statistical sample consists of 30 firms from the industrial, service, and hotel sectors listed on the Iraq Stock Exchange during the period 2016–2025, resulting in 180 firm-year observations. Data were collected from firms’ financial statements and analyzed using dynamic panel data models and the Blundell and Bond (1998) System Generalized Method of Moments (System GMM) estimator. aggressive investment and financing policies were used as the main explanatory variables. Empirical findings show that aggressive investment policy does not have a statistically significant effect on the speed of working capital adjustment. In contrast, aggressive financing policy exhibits a positive effect on adjustment speed and significant at the 10% level, suggesting that firms with greater reliance on short-term financing adjust more rapidly toward their target working capital levels. Overall, the findings suggest that working capital adjustment in the Iraqi market is largely constrained by institutional, financial, and macroeconomic factors. this study lies in integrating working capital management strategies with the dynamic concept of working capital adjustment speed using a partial adjustment framework and System GMM estimation in an emerging market setting such as Iraq, where institutional and financial constraints may significantly affect firms' adjustment behavior. Therefore, Financial manages in Iraq must efforts to improve financial flexibility and access to financing resources may be more effective than merely adopting aggressive or conservative working capital strategies

Keywords

Aggressive

investment policies

financing policies

speed of working capital adjustment

Subjects

• Finance

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