Does debt affect profitability? An empirical study of French trade sector
AbstractThis article aims to expand existing empirical knowledge on the impact of debt level on profitability of companies. We analyze a sample of an unbalanced panel of 2325 unlisted French companies of trade sector spanning over a period of 1999 to 2006. By using the generalized method of moments (GMM), we show that the debt affects negatively the profitability, not only linearly, but also, in a non-linear (concave) way. However, while analyzing according to different size classes (VSEs, SMEs and LEs); we find that the linear negative effect becomes larger and the non-linear effect is significant only in small and medium-sized enterprises (SME).
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 43968.
Date of creation: 23 Jan 2013
Date of revision:
Debt; GMM; Panel data; Profitability;
Other versions of this item:
- Mazen Kebewar, 2013. "Does debt affect profitability? An empirical study of French trade sector," Working Papers halshs-00780310, HAL.
- Kebewar, Mazen, 2013. "Does debt affect profitability? An empirical study of French trade sector," EconStor Preprints 73185, ZBW - German National Library of Economics.
- L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-01-26 (All new papers)
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