The Effect of Debt on Corporate Profitability: Evidence from French Service Sector

17 Pages Posted: 21 Dec 2012 Last revised: 26 May 2014

See all articles by Mazen Kebewar

Mazen Kebewar

Université d’Orléans - Laboratoire d’Économie d’Orléans (LEO)

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Date Written: December 18, 2012

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).

Keywords: Debt, GMM, Panel data, Profitability

JEL Classification: C33, G32, L25

Suggested Citation

Kebewar, Mazen, The Effect of Debt on Corporate Profitability: Evidence from French Service Sector (December 18, 2012). Available at SSRN: https://ssrn.com/abstract=2191075 or http://dx.doi.org/10.2139/ssrn.2191075

Mazen Kebewar (Contact Author)

Université d’Orléans - Laboratoire d’Économie d’Orléans (LEO) ( email )

Rue de Blois - BP: 26739, 45067 Orléans Cedex 2
Orléans, 45100
France

HOME PAGE: http://www.univ-orleans.fr/leo/index.php

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