Business Strategies and Financial Distress Risk in Seasoned Listed Companies: Extending Earnings Quality Role
By: Michał Comporek
References
- Agrawal, K., & Chatterjee, C. (2015). Earnings Management and Financial Distress: Evidence from India. Global Business Review, 16(5), 140S–154S.
https://doi.org/10.1177/0972150915601928 - Agustia, D., Abdi Muhammad, N. P., & Permatasari, Y. (2020). Earnings Management, Business Strategy, and Bankruptcy Risk: Evidence from Indonesia. Heliyon, 6(2), e03317.
https://doi.org/10.1016/j.heliyon.2020.e03317 - Ahmed, A. M., Iqbal, U., & Atif, M. M. (2025). Asymmetric Cost Behavior and Financial Distress. Economics Letters, 247, 112121.
https://doi.org/10.1016/j.econlet.2024.112121 - Allayannis, G., & Simko, P. J. (2022). Discretionary Earnings Smoothing, Credit Quality, and Firm Value. Journal of Banking & Finance, 140, 106514.
https://doi.org/10.1016/j.jbankfin.2022.106514 - Altman, E. I. (1993). Evaluating the Chapter 11 Bankruptcy-Reorganization Process. Columbia Business Law Review, 1.
- Altman, E. I., & Hotchkiss, E. (2006). Corporate Financial Distress and Bankruptcy: Predict and Avoid Bankruptcy, Analyze and Invest in Distressed Debt. Hoboken, NJ: Wiley.
- Altman, E. I., Hartzell, J., & Peck, M. (1995). A Scoring System for Emerging Market Corporate Bonds. New York: Salomon Brothers.
- Anderson, M., Banker, R., & Janakiraman, S. (2003). Are Selling, General and Administrative Costs “Sticky”? Journal of Accounting Research, 41(1), 47–63.
https://doi.org/10.1111/1475-679X.00095 - Baker, S. R., Bloom, N., & Davis, S. J. (2016). Measuring Economic Policy Uncertainty. The Quarterly Journal of Economics, 131(4), 1593–1636.
https://doi.org/10.1093/qje/qjw024 - Balcaen, S., & Ooghe, H. (2006). 35 Years of Studies on Business Failure: An Overview of the Classic Statistical Methodologies and their Related Problems. The British Accounting Review, 38(1), 63–93.
- Ball, R., & Shivakumar, L. (2005). Earnings quality in UK private firms: Comparative loss recognition timeliness. Journal of Accounting and Economics, 39(1), 83–128.
https://doi.org/10.1016/j.jacceco.2004.04.001 - Barney, J. (1991). Firm Resources and Sustained Competitive Advantage. Journal of Management, 17(1), 99–120.
https://doi.org/10.1177/014920639101700108 - Barth, M. E., Li, S., & McClure, C. (2021). Earnings Quality: Evidence from the Field. Accounting Horizons, 35(2), 1–22.
- Biddle, G. C., Ma, M. L., & Song, F. M. (2022). Accounting Conservatism and Bankruptcy Risk. Journal of Accounting, Auditing & Finance, 37(2), 295–323.
https://doi.org/10.1177/0148558X20934244 - Bisogno, M., & De Luca, R. (2015). Financial Distress and Earnings Manipulation: Evidence from Italian SMEs. Journal of Accounting and Finance, 4, 42–51. Retrieved from
https://ssrn.com/abstract=2596295 - Bryan, D., Dinesh, F. G., & Tripathy, A. (2013). Bankruptcy Risk, Productivity and Firm Strategy. Review of Accounting and Finance, 12(4), 309–326.
https://doi.org/10.1108/RAF-06-2012-0052 - Camisón, C., Clemente, J. A., & Camisón-Haba, S. (2022). Asset Tangibility, Information Asymmetries and Intangibles as Determinants of Family Firms’ Leverage. Review of Managerial Science, 16(7), 2047–2082.
https://doi.org/10.1007/s11846-022-00522-y - Campa, D., & Camacho-Miñano, M.-M. (2015). The Impact of SME’s Pre-Bankruptcy Financial Distress on Earnings Management Tools. International Review of Financial Analysis, 42, 222–234.
https://doi.org/10.1016/j.irfa.2015.07.004 - Chen, G. Z., & Keung, E. C. (2019). The Impact of Business Strategy on Insider Trading Profitability. Pacific-Basin Finance Journal, 55, 270–282.
https://doi.org/10.1016/j.pacfin.2019.04.007 - Chen, M., Dutordoir, M., & Strong, N. C. (2025). Cash-Rich Seasoned Equity Issuers. The European Journal of Finance, 31(8), 1058–1087.
https://doi.org/10.1080/1351847X.2024.2445284 - Costa, M. D., & Habib, A. (2023). Cost Stickiness and Firm Value. Journal of Management Control, 34(2), 235–273.
https://doi.org/10.1007/s00187-023-00356-z - Costa, M., Lisboa, I., & Gameiro, A. (2022). Is the Financial Report Quality Important in the Default Prediction? SME Portuguese Construction Sector Evidence. Risks, 10(5), 98.
https://doi.org/10.3390/risks10050098 - Dainelli, F., Bet, G., & Fabrizi, E. (2024). The Financial Health of A Company and the Risk of its Default: Back to the Future. International Review of Financial Analysis, 95(Part B), 103449.
https://doi.org/10.1016/j.irfa.2024.103449 - da Silva, J. C. Q., Aparecida, M., & Klann, R. C. (2025). Earnings Management and the Corporate Life Cycle: The Moderating Role of Managerial Ability. Advances in Scientific and Applied Accounting, 18(2), 219–232.
https://doi.org/10.14392/asaa.2025180209 - David, J. S., Hwang, Y., Pei, B. K. W., & Reneau, J. H. (2002). The Performance Effects of Congruence Between Product Competitive Strategies and Purchasing Management Design. Management Science, 48(7), 866–885.
https://doi.org/10.1287/mnsc.48.7.866.2819 - Debdas, R., Chanchal, C., & Ananya, P. (2021). Financial Distress, the Severity of Financial Distress and Direction of Earnings Management: Evidences from Indian Economy. FIIB Business Review, 1(2), 11–23.
https://doi.org/10.1177/23197145211039351 - Dechow, P. M., Sloan, R. G., & Sweeney, A. P. (1995). Detecting Earnings Management. The Accounting Review, 70(2), 193–225.
- Dechow, P., Ge, W., & Schrand, C. (2010). Understanding Earnings Quality: A Review of the Proxies, their Determinants and their Consequences. Journal of Accounting and Economics, 50(2–3), 344–401.
https://doi.org/10.1016/j.jacceco.2010.09.001 - Diab, A., Eissa, A. M., & Hamdy, A. (2021). The Relationship Between Business Strategy and Bankruptcy Risk: Does Financial Flexibility Matter? Evidence from a Developing Market. Cogent Business & Management, 12(1).
https://doi.org/10.1080/23311975.2025.2553872 - DiMaggio, P. J., & Powell, W. W. (1983). The Iron Cage Revisited: Institutional Isomorphism and Collective Rationality in Organizational Fields. American Sociological Review, 48(2), 147–160.
https://doi.org/10.2307/2095101 - Draief, S., & Chouaya, A. (2022). The Effect of Debt Maturity Structure on Earnings Management Strategies. Managerial Finance, 48(7), 985–1006.
https://doi.org/10.1108/MF-07-2021-0314 - Eckbo, B. E., Masulis, R. W., & Norli, Ø. (2000). Seasoned Public Offerings: Resolution of the ‘New Issues Puzzle’. Journal of Financial Economics, 56(2), 251–291.
https://doi.org/10.1016/S0304-405X(00)00041-6 - Fedora, A. C., Rudiawarni, F. A., Sulistiawan, D., & Gümrah, A. (2025). Exploring the Interplay of Earnings Management, Business Strategy and Market Competition: The Case of Indonesia and South Korea. Asian Journal of Accounting Research, 10(1), 45–62.
https://doi.org/10.1108/AJAR-01-2024-0005 - Firlej, C., & Firlej, K. A. (2024). Multidimensional Discriminant Analysis as an Instrument for Assessing the Risk of Bankruptcy of WIG-food Index Enterprises. Krakow Review of Economics and Management, 1(1003), 117–136.
https://doi.org/10.15678/KREM.2024.1003.0107 - Francis, J., Olsson, P., & Schipper, K. (2006). Earnings Quality. Foundations and Trends in Accounting, 1(4), 1–85.
- Franz, D. R., HassabElnaby, H. R., & Lobo, G. J. (2014). Impact of Proximity to Debt Covenant Violation on Earnings Management. Review of Accounting Studies, 19(1), 473–505.
https://doi.org/10.1007/s11142-013-9252-9 - Fuady, M., Safitri, J., Rita, M. R., Pagestuti, I. R. D., & Wahyudi, S. (2019). How Companies at Mature Stages Choose their Capital Structure? Evidence from Indonesian Data Panel. International Journal of Scientific & Technology Research, 8(9), 491–499.
- García Lara, J. M., Osma, B. G., & Neophytou, E. (2009). Earnings Quality in Ex-Post Failed Firms. Accounting and Business Research, 39(2), 119–138.
https://doi.org/10.1080/00014788.2009.9663353 - Ghazali, A. W., Shafie, N. A., & Sanusi, Z. M. (2015). Earnings Management: An Analysis of Opportunistic Behaviour, Monitoring Mechanism and Financial Distress. Procedia Economics and Finance, 28, 190–201.
https://doi.org/10.1016/S2212-5671(15)01100-4 - Habib, A., Uddin, B., & Islam, A. (2013). Financial Distress, Earnings Management and Market Pricing of Accruals During the Global Financial Crisis. Managerial Finance, 39(2), 155–180.
https://doi.org/10.1108/03074351311294007 - Haga, J., Höglund, H., & Sundvik, D. (2018). Stock Market Listing Status and Real Earnings Management. Journal of Accounting and Public Policy, 37(5), 420–435.
https://doi.org/10.1016/j.jaccpubpol.2018.09.002 - Hambrick, D. C. (1983). High Profit Strategies in Mature Capital Goods Industries: A Contingency Approach. Academy of Management Journal, 26(4), 687–707.
- Hambrick, D. C., & Mason, P. A. (1984). Upper Echelons: The Organization as a Reflection of its Top Managers. Academy of Management Review, 9(2), 193–206.
https://doi.org/10.5465/amr.1984.4277628 - Harper, A., Lu, Y., & Tembhurne, S. (2025). Firm Policies and Uncertainty About Risk. Journal of Risk and Financial Management, 18(2), 96.
https://doi.org/10.3390/jrfm18020096 - Hartlieb, S., & Loy, T. R. (2022). The Impact of Cost Stickiness on Financial Reporting: Evidence from Income Smoothing. Accounting & Finance, 62(3), 3913–3950.
https://doi.org/10.1111/acfi.12910 - Hassanein, A., & Younis, M. (2020). Cost Stickiness Behavior and Financial Crisis: Evidence from the UK Chemical Industry. Corporate Ownership & Control, 17(2), 46–56.
http://doi.org/10.22495/cocv17i2art4 - Hsiao, F., Szu, H. L., & Ai, C. H. (2010). Earnings Management, Corporate Governance, and Auditor’s Opinions: A Financial Distress Prediction Model. Investment Management and Financial Innovations, 7(3), 29–40
- Hsu, P., O’Hanlon, J., & Peasnell, K. V. (2011). Financial Distress and the Earnings Sensitivity Difference Measure of Conservatism. Abacus, 47(3), 284–314.
https://doi.org/10.1111/j.1467-6281.2011.00342.x - Hsu, P.-H., & Jan, C.-L. (2023). Accrual-Based Earnings Management and the COVID-19 Pandemic. Journal of Applied Business and Economics, 25(5), 61–71.
https://doi.org/10.33423/jabe.v25i5.6512 . - Jagiełło, R. (2013). Analiza dyskryminacyjna i regresja logistyczna w procesie oceny zdolności kredytowej przedsiębiorstw. Warszawa: Narodowy Bank Polski.
- Jensen, M. C., & Meckling, W. H. (1976). Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure. Journal of Financial Economics, 3(4), 305–360.
https://doi.org/10.1016/0304-405X(76)90026-X - Jones, J. (1991). Earnings Management During Import Relief Investigations. Journal of Accounting Research, 29(2), 193–228.
https://doi.org/10.2307/2491047 - Josephson, B., Johnson, J., & Mariadoss, B. (2016). Strategic Marketing Ambidexterity: Antecedents and Financial Consequences. Journal of the Academy of Marketing Science, 44(4), 539–554.
https://doi.org/10.1007/s11747-015-0438-5 - Kothari, S. P., Leone, A. J., & Wasley, C. E. (2005). Performance Matched Discretionary Accrual Measures. Journal of Accounting and Economics, 39(1), 163–197.
https://doi.org/10.1016/j.jacceco.2004.11.002 - Kuang, W. (2021). Real Earnings Smoothing and Crash Risk: Evidence from Japan. Journal of International Financial Management & Accounting, 33(4).
https://doi.org/10.1111/jifm.12143 - Lefebvre, V. (2025). Looking at the Relationship Between Growth and Profitability: The Role of Cost Stickiness as a Strategic Liability. Journal of Accounting & Organizational Change, 21(1), 70–93.
https://doi.org/10.1108/JAOC-06-2023-0107 - Leuz, C., Nanda, D., & Wysocki, P. D. (2003). Earnings Management and Investor Protection: An International Comparison. Journal of Financial Economics, 69(3), 505–527.
https://doi.org/10.1016/S0304-405X(03)00121-1 - Li, Y., Li, X., Xiang, E., & Djajadikerta, H. G. (2020). Financial Distress, Internal Control, and Earnings Management: Evidence from China. Journal of Contemporary Accounting & Economics, 16(3), 100210.
https://doi.org/10.1016/j.jcae.2020.100210 - Lisicki, B., & Dąbrowska, D. (2024). Bankruptcy Analysis of Polish Waste Management Companies: Proposal of a Discriminatory Model. International Journal of Public Administration, Management and Economic Development, 9(1), 1–18.
https://doi.org/10.60026/ijpamed.v9i1.175 - Lizińska, J., & Czapiewski, L. (2023). Trudności finansowe a memoriałowe i realne zarządzanie wynikiem finansowym w polskich spółkach giełdowych. Zeszyty Teoretyczne Rachunkowości, 47(3), 79–97.
- Lopo, A., & Ferreira, B. (2019). Business Strategy and Tax Aggressiveness in Brazil. Journal of Strategy and Management, 12(4), 522–535.
https://doi.org/10.1108/JsMA-03-2019-0040 - Mączyńska, E., & Zawadzki, M. (2006). Dyskryminacyjne modele predykcji bankructwa przedsiębiorstw. Ekonomista, 2, 205–235
- Martina, M., & Wadi, I. (2025). Navigating Economic Shocks: The Role of Smoothing Behavior and Leverage in Manufacturing Profitability and Financial Risk. International Journal of Economics Development Research, 6(2), 866–879.
https://doi.org/10.37385/ijedr.v6i2.7454 - Misztal, A. W., & Comporek, M. (2025). Assessing the risk of earnings management through the lens of individual moral philosophy: Insights from accounting professionals. Risks, 13(10), 184.
https://doi.org/10.3390/risks13100184 - Muljono, D., & Suk, K. (2018). Impacts of Financial Distress on Real and Accrual Earnings Management. Journal Akuntansi, 22(2), 222–238.
https://doi.org/10.24912/ja.v22i2.349 - Nasev, J. (2009). The link between conditional conservatism and cost stickiness. In J. Nasev (Ed.), Conditional and Unconditional Conservatism: Implications for Accounting Based Valuation and Risky Projects (pp. 47–63). Wiesbaden: Gabler.
https://doi.org/10.1007/978-3-8349-8458-6_4 - Panigrahi, A. (2019). Validity of Altman’s ‘Z’ Score Model in Predicting Financial Distress of Pharmaceutical Companies. NMIMS Journal of Economics and Public Policy, 4(1), 65–73.
https://ssrn.com/abstract=3326312 - Purba, G., Fransisca, C., & Joshi, P. (2022). Analyzing Earnings Management Preferences from Business Strategies. Journal of Financial Reporting and Accounting, 20(5), 979–993.
https://doi.org/10.1108/JFrA-04-2021-0103 - Rostami, V., & Rezaei, L. (2021). The Effect of Competition in the Product Market and Financial Flexibility on Business Strategy. Journal of Facilities Management, 19(5), 632–651.
https://doi.org/10.1108/JFM-11-2020-0086 - Shabani, N. A., & Sofian, S. (2018). Earnings Smoothing and Bankruptcy Risk in Liquidating Private Firms. Asian Journal of Finance & Accounting, 10(1), 162–177.
https://doi.org/10.5296/ajfa.v10i1.12904 - Sholikhah, R. M., & Suryani, A. W. (2020). The influence of financial distress, conflict of interest, and litigation risk on accounting conservatism. KnE Social Sciences, The 3rd International Research Conference on Economics and Business, 222–239.
https://doi.org/10.18502/kss.v4i7.6854 - Skalická, M., Zinecker, M., Pietrzak, M. B., Meluzín, T., & Dohnal, M. (2019). Financial Impact Analysis of Going Public at the Warsaw Stock Exchange: Using Fuzzy Set Theory to Understand Behaviours of Mature Companies. Management & Marketing. Challenges for the Knowledge Society, 14(1), 59–79.
https://doi.org/10.2478/mmcks-2019-0005 - Sun, J., Li, H., Chang, P. C., & He, K. Y. (2016). The Dynamic Financial Distress Prediction Method of EBW-VSTW-SVM. Enterprise Information Systems, 10(6), 611–638.
- Thu, L. Q. (2023). Impact of Earning Management and Business Strategy on Financial Distress Risk of Vietnamese Companies. Cogent Economics & Finance, 11(1).
https://doi.org/10.1080/23322039.2023.2183657 - Ting, W., Yen, S. H., & Huang, S. S. (2009). Top Management Compensation, Earnings Management and Default Risk: Insights from the Chinese Stock Market. The International Journal of Business and Finance Research, 3(1), 31–46. Retrieved from
https://ssrn.com/abstract=1555228 - Uğur, M., Solomon, E. M., & Zeynalov, A. (2022). Leverage, Competition and Financial Distress Hazard: Implications for Capital Structure in the Presence of Agency Costs. Economic Modelling, 108, 105740.
https://doi.org/10.1016/j.econmod.2021.105740 - Viana Jr., D. B. C., Lourenço, I., & Black, E. L. (2022). Financial distress, earnings management and Big 4 auditors in emerging markets. Accounting Research Journal, 35(5),
https://doi.org/10.1108/ARJ-06-2021-0165 - Watkins, M., & Bazerman, M. H. (2004). Predictable Surprises: The Disasters You Should Have Seen Coming. Harvard Business Review, 82(3), 72–81.
- Wu, P., Gao, L., & Gu, T. (2015). Business Strategy, Market Competition and Earnings Management: Evidence from China. Chinese Management Studies, 9(3), 401–424.
https://doi.org/10.1108/cMS-12-2014-0225
Language: English
Page range: 76 - 99
Submitted on: Oct 6, 2025
Accepted on: Mar 6, 2026
Published on: Apr 30, 2026
Published by: Faculty of Economic Sciences, University of Warsaw
In partnership with: Paradigm Publishing Services
Publication frequency: 1 issue per year
Keywords:
Related subjects:
© 2026 Michał Comporek, published by Faculty of Economic Sciences, University of Warsaw
This work is licensed under the Creative Commons Attribution 4.0 License.
