Comparing SME Financial Profitability in the French Overseas Departments and Mainland France

The structural differences between the French Overseas Departments (FOD) and mainland France, as well documented in the literature (Dreyer et Savoye, 2013; Caupin et Savoye, 2019), may be associated with financial profitability gaps between these territories. The question arises whether, once these structural differences are taken into account, a residual profitability gap remains between the FOD and mainland France. Two complementary empirical approaches were implemented – propensity score matching and unconditional quantile treatment effect estimation (Firpo, 2007). The results show that, once structural differences between the FOD and mainland France are neutralized, average residual gaps in financial profitability remain only in Guyane. However, the estimation based on the method of Firpo (2007) highlights differentiated effects depending on the position of firms within the distribution of financial profitability. The least profitable FOD SMEs, as well as those around the median, exhibit no significant residual gap in financial profitability relative to their counterparts in mainland France. In contrast, significant differences emerge at the top of the distribution, except in the French Antilles. In Guyane, the most profitable SMEs exhibit higher financial profitability than their most profitable counterparts in mainland France – an advantage that could be partially linked to activities of the aerospace sector. Similarly, in Réunion, the financial profitability of the most profitable SMEs is higher compared to their counterparts in mainland France. These firms are primarily oriented toward the local market and benefit from tax deductions.