An Empirical Comparison of Alternative Methods for the Estimation of the Degree of Operating Leverage

Michael Timothy Dugan, Keith A. Shriver

Research output: Contribution to journalArticle

11 Citations (Scopus)

Abstract

Much diversity exists in the approaches used to estimate the degree of operating leverage in empirical financial research. This study analyzes and compares two techniques for the estimation of the degree of operating leverage coefficients for a sample of 245 firms in seven different industries over two alternative estimation periods. The results indicate that the O'Brien and Vanderheiden estimation technique differs significantly from the Mandelker and Rhee estimation technique. Furthermore, the O'Brien and Vanderheiden estimates appear to be more consistent with the classical ex ante model of degree of operating leverage coefficients. These results may facilitate future research on the estimation of the degree of operating leverage and on the relationship between operating leverage and systematic risk.

Original languageEnglish (US)
Pages (from-to)309-321
Number of pages13
JournalFinancial Review
Volume27
Issue number2
DOIs
StatePublished - Jan 1 1992
Externally publishedYes

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Operating leverage
Coefficients
Systematic risk
Industry

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

Cite this

An Empirical Comparison of Alternative Methods for the Estimation of the Degree of Operating Leverage. / Dugan, Michael Timothy; Shriver, Keith A.

In: Financial Review, Vol. 27, No. 2, 01.01.1992, p. 309-321.

Research output: Contribution to journalArticle

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