The Effects of Short-Term Liabilities on Profitability: a Comparison of Us and Germany

Baum, Christopher F.; Schaefer, Dorothea; Talavera, Oleksandr

doi:10.2139/ssrn.967260

Cited by 35 publications

(40 citation statements)

References 23 publications

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“…A negative effect of debt on profitability was confirmed by Majumdar and Chhibber (1999), Eriotis et al (2002), Goddard et al (2005), Rao et al (2007), Zeitun and Tian (2007) and Nunes et al (2009). On the other hand, Baum et al (2006), Berger and Bonaccorsi (2006), Psillaki (2007, 2010), showed a positive influence. In addition, Simerly and LI (2000), Mesquita and Lara (2003) and Weill (2008), find both effects in their studies.…”

Section: Introductionmentioning

confidence: 81%

“…Besides that, Berger and Bonaccorsi (2006) and Margaritis and Psillaki (2007) finds the presence of a non linear effect (inverse U-shaped relationship). Finally, a non significant effect was confirmed by Baum et al (2006) in American industrial companies.…”

Section: Introductionmentioning

confidence: 85%

“…However, this role remains a controversial subject which attracts the attention of many researchers as Goddard et al (2005), Berger and Bonaccorsi (2006), Rao et al (2007), Baum et al (2006), Weill (2008), Nunes et al (2009) and Margaritis and Psillaki (2010). Indeed, researchers analyze the debt ratio and try to determine whether an optimal debt ratio exists or not.…”

Section: Introductionmentioning

confidence: 99%

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

Kebewar

2013

SSRN Journal

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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.

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Section: Introductionmentioning

confidence: 81%

Section: Introductionmentioning

confidence: 85%

Section: Introductionmentioning

confidence: 99%

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

Kebewar

2013

SSRN Journal

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“…The usage of long-term debt results in long run profitability of the company. However, Baum et al (2006) demonstrate that long term debt negatively affects productivity. High repayment costs are shown as a reason for this relation.…”

Section: Methodsmentioning

confidence: 99%

The Impact of Firm Specific Characteristics on The Relation Between Financial Distress And Capital Structure Decisions

Abdioğlu

2019

isarder

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This study investigates the effect of some of the firm level variables on the relation between financial distress and capital structure decisions. Design/ methodology/approach-The manufacturing firms listed in Turkish market between 2007 and 2017 are analysed. Fixed effect panel regressions are used in the analyses. Findings-Financial distress level increases as leverage and short-term debt maturity usage increase. Firm size, return on equity, asset tangibility variables are reported as effective on the association between leverage and financial distress. Return on equity and asset tangibility have impacts on the relation between financial distress and debt maturity. Discussion-The findings show that increased debt level results in higher level of financial distress which is in line with Trade-Off Theory. As the debt level of more profitable firms increases, the financial distress level of those firms increases. Moreover, increasing debt among large firms causes higher level of financial distress. Asset tangibility is also effective in reducing negative impact of debt on financial success. Increasing long term debt among firms with higher ROE, results in increased financial distress levels. Finally, increasing long-term debt ratio among firms with higher tangibility causes higher financial distress level.

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“…Researchers have investigated the role of debt in firms' performance for more than fifty years (e.g., Modigliani and Miller, 1958). However, this role remains a questionable subject which has attracted the attention of many researchers (e.g., Goddard et al, 2005;Berger and Bonaccorsi di Patti, 2006;Rao et al, 2007;Baum et al, 2007a;Weill, 2008;Nunes et al, 2009;Margaritis and Psillaki, 2010;Kebewar and Shah, 2013). Researchers have analysed the leverage ratio (called also debt ratio or debts) to determine whether an optimal leverage ratio exists or not.…”

Section: Leverage Ratio and Profitabilitymentioning

confidence: 99%

Determinants Of A Fast-Growing Firm’s Profits: Empirical Evidence For Slovenia

Močnik

Širec

2015

Annals of the Alexandru Ioan Cuza University - Economics

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This paper seeks to explain the relationship between a firm’s profitability and firm size, leverage ratio and labour costs – using a sample of 782 Slovenian fast-growing firms from the years 2008 and 2009. We determined that profitability is negatively related to the firm size and leverage ratio, but positively to the labour costs. These results illustrate that, with increasing firm size, a fast-growing firm becomes less profitable. The negative coefficient for the leverage ratio indicates that the higher the extent to which debts were used as the source of financing, the lower the profits. One explanation for this is that profitable, fast-growing firms rely on their equity capital. Alternatively, higher-leveraged firms bear greater risks of bankruptcy; consequently, creditors are reluctant to approve credit for such clients. The positive association between labour costs and profitability implies that the higher the labour cost, the higher the profitability of fast-growing firms.

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The Effects of Short-Term Liabilities on Profitability: a Comparison of Us and Germany

Cited by 35 publications

References 23 publications

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

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

The Impact of Firm Specific Characteristics on The Relation Between Financial Distress And Capital Structure Decisions

Determinants Of A Fast-Growing Firm’s Profits: Empirical Evidence For Slovenia

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