<span style="color: black; mso-themecolor: text1;">Effects of Debt Financing Decisions on Profitability: A Comparison of USA and Europe Biopharmaceutical Industry

Debt financing is important for financing major investments in the biopharmaceutical industry. Debt financing allows companies to raise funds without giving up ownership or control through indenture and covenants of the company. In this study, I analyze the effects of debt financing decisions on profitability in the biopharmaceutical industry. I find that short-term debt, long-term debt and total debt negatively impacts return on assets (ROA) as a firm's profitability measure. A comparison is made between the US and Europe biopharmaceutical firms and the result shows the negative effects of short-term and long-term debt on profitability persist more for US biopharmaceutical firms than Europe firms. Short-term and long-term debt both impact profitability negatively with 10-year lagged R&amp;D intensity and financial distress. Short-term debt's negative impact is stronger in post-Covid-19, indicating increased financial strain. Long-term debt consistently affects profitability negatively, with relative stable effects during the pre- and post-Covid-19.