Figures & data
Table 1. Descriptive statistics. All variables are reported in Appendix
Table 2. The correlation coefficients between regression variables and the variance inflation factor (VIF). All variables are reported in Appendix. *Significant at the 10% level. ** Significant at the 5% level. *** Significant at the 1%
Table 3. Business strategy and financial distress risk. This table reports the results of the regressions between variables using various estimation methods. Financial distress risk (Zscore) is dependent variable. A high Zscore indicates a low risk of financial distress. Two key explanatory variables are profit margin (PM) and assets turnover of operation (ATO). Other control variables are reported in Appendix. All variables are winsorized and standardized (mean value of zero and unit variance value). We follow (Petersen, Citation2009) to adjust standard errors for clustering by company and year. T ratio is reported in parenthesis. *, **, *** is significant at the 10%, 5% and 1% level, respectively
Table 4. Earning management and financial distress risk. This table reports the results of the regressions between variables using various estimation methods. Financial distress risk (Zscore) is dependent variable. A high Zscore indicates a low risk of financial distress. The key explanatory variable is discretionary accruals (DA). Other control variables are reported in Appendix. All variables are winsorized and standardized (mean value of zero and unit variance value). We follow (Petersen, Citation2009) to adjust standard errors for clustering by company and year. T ratio is reported in parenthesis. *, **, *** is significant at the 10%, 5% and 1% level, respectively
Table 5. Effect of both business strategy and earning management on financial distress risk. This table reports the results of the regressions between variables using various estimation methods. Financial distress risk (Zscore) is dependent variable. A high Zscore indicates a low risk of financial distress. Five key explanatory variables are profit margin (PM), assets turnover of operation (ATO), discretionary accruals (DA), abnormal cost of goods sold (ACOGS), and abnormal change in inventory (A∆INV). Other control variables are reported in Appendix. All variables are winsorized and standardized (mean value of zero and unit variance value). We follow (Petersen, Citation2009) to adjust standard errors for clustering by company and year. T ratio is reported in parenthesis. *, **, *** is significant at the 10%, 5% and 1% level, respectively
Table 6. Effect of both business strategy and earning management on financial distress risk (measure by Oscore. This table reports the results of the regressions of the O-score on business strategy and earning management. A higher Oscore indicates a greater chance of financial distress. Other variables are reported in Appendix. All variables are winsorized and standardized (mean value of zero and unit variance value). We follow (Petersen, Citation2009) to adjust standard errors for clustering by company and year. T ratio is reported in parenthesis. *, **, *** is significant at the 10%, 5% and 1% level, respectively
Table 7. Effect of both business strategy and earning management on financial distress risk (measure by ZMscore). This table reports the results of the regressions of the ZMscore on business strategy and earning management. A higher ZMscore indicates a greater chance of financial distress. Other control variables are reported in Appendix. All variables are winsorized and standardized (mean value of zero and unit variance value). We follow (Petersen, Citation2009) to adjust standard errors for clustering by company and year. T ratio is reported in parenthesis. *, **, *** is significant at the 10%, 5% and 1% level, respectively