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The Effects of Estimation Period, Industry, and Proxy on the Calculation of the Degree of Operating Leverage

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  • Dugan, Michael T
  • Shriver, Keith A

Abstract

Much diversity exists in the approaches used by finance researchers to estimate a firm's degree of operating leverage. This diversity is partially attributable to the lack of accessible accounting data suitable for the calculation. As a result, researchers have devised various proxies for the degree of operating leverage from whatever accounting data are externally available. This paper examines the effects of estimation period, industry, and proxy on the calculation of degree of operating leverage. The analyses indicate that the various proxies for degree of operating leverage exhibit both conceptual and empirical differences that are generally consistent across industries and over estimation periods. Copyright 1989 by MIT Press.

Suggested Citation

  • Dugan, Michael T & Shriver, Keith A, 1989. "The Effects of Estimation Period, Industry, and Proxy on the Calculation of the Degree of Operating Leverage," The Financial Review, Eastern Finance Association, vol. 24(1), pages 109-122, February.
    • Handle: RePEc:bla:finrev:v:24:y:1989:i:1:p:109-22
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    Cited by:

    1. Darrat, Ali F. & Mukherjee, Tarun K., 1995. "Inter-industry differences and the impact of operating and financial leverages on equity risk," Review of Financial Economics, Elsevier, vol. 4(2), pages 141-155.
    2. Ali F. Darrat & Tarun K. Mukherjee, 1995. "Inter‐industry differences and the impact of operating and financial leverages on equity risk," Review of Financial Economics, John Wiley & Sons, vol. 4(2), pages 141-155, March.
    3. Luis García‐Feijóo & Randy D. Jorgensen, 2010. "Can Operating Leverage Be the Cause of the Value Premium?," Financial Management, Financial Management Association International, vol. 39(3), pages 1127-1154, September.

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