A defensive stand by itself is suitable depending on the situation and whether you can exploit it to your advantage.

Wellington in Portugal is a prime example of a defensive stand followed by excellent exploitation. Wellington's troops couldn't have faced Massena and defeated them in open battle, so Wellington sensibly withdrew into the Torres Vedras lines to have the French either fall back to get supplies (and lose the land they conquered) or stay put and die. When fresh British troops arrived, they drove back Massena and the French troops.

Defensive battles work if you have a plan that exploits the attackers, making them commit or fall back and lose face.

In M2TW, I fight defensive battles, but in the engine, with a human's superior abilities, can draw, feint, etc. and play the game so effectively as attacker, it doesn't pay to be defender. While England or Spain can build ships, forts, and then horde cash for a rainy day, it doesn't pay to do so in the game.