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 ZBW - German National Library of Economics in its series EconStor Preprints with number 73185.
Date of creation: 10 May 2013
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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," MPRA Paper 43968, University Library of Munich, Germany.
- C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
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