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

Mazen Kebewar (1)

1 LEO - Laboratoire d'Économie d'Orleans [UMR7322]

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).

Mots clés: Debt; GMM; Panel data; Profitability

Domaines: Economies et finances; Gestion et management; Méthodes et statistiques; Econométrie de la finance [q-fin.ST]

Mazen Kebewar. The effect of debt on corporate profitability : Evidence from French service sector. 2012. ⟨halshs-00766758v2⟩