Abstract
Purpose: The purpose of this paper is to provide a literature review of elasticity-based techniques for the estimation of the degree of operating leverage (DOL) and the degree of financial leverage (DFL) in empirical corporate finance research. Design/methodology/approach: This paper describes the specific details of the estimation of DOL and DFL coefficients under both of the primary estimation techniques and documents the econometric properties of the estimates derived from each techniques. Findings: There are tradeoffs between the two techniques, as each technique has both appealing and limiting features. Originality/value: This paper indicates how each of the two techniques possesses limitations and suggests that future research should attempt to develop estimation techniques that overcome those limitations.
Original language | English (US) |
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Pages (from-to) | 200-205 |
Number of pages | 6 |
Journal | Journal of Financial Economic Policy |
Volume | 13 |
Issue number | 2 |
DOIs | |
State | Published - Mar 15 2021 |
Keywords
- Corporate finance and governance
- Degree of financial leverage
- Degree of operating leverage
- Econometric and statistical methods
- Log-linear regression
- Switching regression models
ASJC Scopus subject areas
- Finance
- Economics and Econometrics