The Effect of Working Capital Strategies on the Speed of Working Capital Adjustment

This study examines the effect of working capital strategies on the speed of working capital adjustment among firms listed on the Iraq Stock Exchange (ISX). The sample comprised ۳۰ firms from the industrial, service, and hotel sectors over the period ۲۰۱۶–۲۰۲۵, yielding ۱۸۰ firm-year observations. Data were obtained from firms’ financial statements and analysed using dynamic panel data models estimated through the System Generalized Method of Moments (System GMM). Aggressive investment and financing policies served as the main explanatory variables. The findings indicate that aggressive investment policy has no statistically significant effect on the speed of working capital adjustment. By contrast, aggressive financing policy has a positive effect on adjustment speed, significant at the ۱۰% level. This suggests that firms relying more heavily on short-term financing adjust more rapidly towards their target working capital levels. Overall, working capital adjustment in the Iraqi market appears to be constrained by institutional, financial, and macroeconomic conditions. The study contributes by examining working capital management strategies within a dynamic partial-adjustment framework using System GMM in an emerging-market setting such as Iraq, where institutional and financial constraints may affect firms’ adjustment behaviour. The findings suggest that financial managers in Iraq should seek to improve financial flexibility and access to financing, rather than relying solely on aggressive or conservative working capital strategies.

کلیدواژه ها:

Aggressive Investment Policy ، Aggressive Financing Policy ، Speed of Working Capital Adjustment