Business Strategies and Financial Distress Risk in Seasoned Listed Companies: Extending Earnings Quality Role

This study investigates the impact of business strategy and earnings quality (EQ) on financial distress (FD) risk in seasoned public companies listed on the Main Market of the Warsaw Stock Exchange over the period 2014–2023. Focusing on companies with long-standing market presence, we analyse operational efficiency, cost stickiness, income smoothing, accounting conservatism and the magnitude of accrual-based earnings management as determinants of financial health. Our findings indicate that higher asset turnover and profit margins reduce the likelihood of distress, while cost flexibility and discretionary accruals (DACC) show no consistent effect. Accounting conservatism yields mixed results, and income smoothing appears to function defensively, lowering distress risk. By jointly examining multiple dimensions of EQ within a strategic framework, the study provides practical implications for managers, investors and researchers and contributes to the literature by integrating strategic and accounting perspectives in the analysis of FD in seasoned public companies.