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The effect of debt on corporate profitability: Evidence from French service sector

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  • Kebewar, mazen
  • SHAH, Syed Muhammad Noaman Ahmed

Abstract

Current study aims to provide new empirical evidence on the impact of debt on corporate profitability. This impact can be explained by three essential theories: signaling theory, tax theory and the agency cost theory. Using panel data sample of 2240 French non listed companies of service sector during 1999-2006. By utilizing generalized method of moments (GMM) econometric technique on three measures of profitability ratio (PROF1, PROF2 and ROA), we show that debt ratio has no effect on corporate profitability, regardless of the size of company (VSEs, SMEs or LEs).

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 43304.

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Date of creation: 10 Dec 2012
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Handle: RePEc:pra:mprapa:43304

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Keywords: Debt; GMM; Panel data; Profitability;

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  11. Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
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