Does Debt Affect Profitability? An Empirical Study of French Trade Sector

10 Pages Posted: 23 Jan 2013

See all articles by Mazen Kebewar

Mazen Kebewar

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

Date Written: January 23, 2013

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

JEL Classification: C33, G32, L25

Suggested Citation

Kebewar, Mazen, Does Debt Affect Profitability? An Empirical Study of French Trade Sector (January 23, 2013). Available at SSRN: https://ssrn.com/abstract=2205794 or http://dx.doi.org/10.2139/ssrn.2205794

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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