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

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  • Kebewar, mazen
  • SHAH, Syed Muhammad Noaman Ahmed

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

  • Kebewar, mazen & SHAH, Syed Muhammad Noaman Ahmed, 2012. "The effect of debt on corporate profitability: Evidence from French service sector," MPRA Paper 43304, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:43304
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    References listed on IDEAS

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    Cited by:

    1. Bambang Sutopo & Arum Kusumaningdyah Adiati & Purnama Siddi, 2021. "Is The Higher Debt Level Profitable for State-Owned Enterprises?," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(1), pages 243-256.
    2. Benter Omollo Achieng & Willy Muturi & Joshua Wanjare, 2018. "Effect of Equity Financing Options on Financial Performance of Non-Financial Firms Listed at the Nairobi Securities Exchange, Kenya," Applied Economics and Finance, Redfame publishing, vol. 5(4), pages 160-173, July.

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    More about this item

    Keywords

    Debt; GMM; Panel data; Profitability;
    All these keywords.

    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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