Debt level and Firm Performance: Empirical evidence based on Dutch firms

In this research, the relationship between debt level and firm performance of Dutch listed firms is examined using panel data from the period 2013-2018 collected from the ORBIS database. Firm performance is measured by four performance measures ROA, ROE, Tobin’s Q, and stock return. Debt level is divided into short-term debt, long-term debt, and total debt, and the control variables are size, profitability, growth, asset structure, and age. An ordinary least square (OLS) regression analysis is conducted, and results showed that none of the hypotheses were supported. The results revealed a significant negative influence of debt level on firm performance, meaning an increase in debt lowers the firm performance. The control variables size and profitability show a significant positive impact on firm performance whereas the control variable asset structure has a significant negative impact.