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

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  • Mazen Kebewar

    () (Laboratoire d'Economie d'Orléans - LEO - Laboratoire d'économie d'Orleans - UO - Université d'Orléans - Université de Tours - CNRS - Centre National de la Recherche Scientifique - Faculty of Economics, Department of Statistics and Management Information Systems - University of Aleppo [Aleppo])

  • Ahmed Shah Syed Muhammad Noaman

    () (LEO - Laboratoire d'économie d'Orleans - UO - Université d'Orléans - Université de Tours - CNRS - Centre National de la Recherche Scientifique)

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).

Suggested Citation

  • Mazen Kebewar & Ahmed Shah Syed Muhammad Noaman, 2013. "The effect of debt on corporate profitability Evidence from French service sector," Working Papers halshs-00825178, HAL.
  • Handle: RePEc:hal:wpaper:halshs-00825178
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00825178
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    References listed on IDEAS

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    Keywords

    Endettement; données de panel; profitabilité.; Profitability; Debt; GMM; Panel data; Profitability.;

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