Does debt affect profitability? An empirical study of French trade sector

Mazen Kebewar

MPRA Paper from University Library of Munich, Germany

Abstract: This 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).

Keywords: Debt; GMM; Panel data; Profitability (search for similar items in EconPapers)
JEL-codes: C33 G32 L25 (search for similar items in EconPapers)
Date: 2013-01-23
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Working Paper: Does debt affect profitability? An empirical study of French trade sector (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:43968

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