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Enhancing the reliability of performance measures in empirical based research: leverage ratios and theoretical based research

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  • Ojo, Marianne

Abstract

As well as incorporating and exploring the role of formal analytical methods as a means of highlighting and discovering foundational and fundamental strategy issues, such as the determinants/causes of performance differences between banking institutions and other corporate structures across various jurisdictions, this paper aims to contribute to the literature on how limitations of empirical based research can be mitigated. Such causes of performance differences will incorporate a consideration of what these determinants are, how they operate, how performance should be measured, the extent to which such differences persist, the extent to which such performance measures should be relied upon. Performance measures to be incorporated in this paper will focus primarily on firm performance measures, such as leverage ratios, as well as a brief discussion of macro-economic indicators. From this perspective, the rise of macroeconomics, micro economic inefficiency debates - as well as the validity of such debates will be considered. In its aim to accentuate why many doubts have arisen as regards the reliability of the Basel III Leverage Ratio as a performance measure, and principally in respect of calibration issues, this paper will also provide an analysis of the recent updates which have taken place in respect of the Basel III Leverage Ratio and the Basel III Supplementary Leverage Ratio – both in respect of recent amendments introduced by the Basel Committee and proposals introduced in several jurisdictions such as the United Kingdom and the United States. The paper will also aim to highlight the role of enforcement and the enforceability of rules, ratios and standards, in ensuring that more comparable, consistent, objective and ultimately reliable performance measures are generated.

Suggested Citation

  • Ojo, Marianne, 2015. "Enhancing the reliability of performance measures in empirical based research: leverage ratios and theoretical based research," MPRA Paper 61789, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:61789
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    References listed on IDEAS

    as
    1. Boettke, Peter J, 2002. "Information and Knowledge: Austrian Economics in Search of its Uniqueness," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 15(4), pages 263-274, December.
    2. Ojo, Marianne, 2009. "Basel II and the Capital Requirements Directive: Responding to the 2008/09 Financial Crisis," MPRA Paper 17379, University Library of Munich, Germany.
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    More about this item

    Keywords

    Basel III; Capital Requirements Directive IV; leverage ratios; enforcement; supervision; Binding Technical Standards; Keynesian revolution; macroeconomics; micro economic inefficiency;
    All these keywords.

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • K2 - Law and Economics - - Regulation and Business Law
    • M4 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting

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