How is the amount of loot calculated at the end of each battle, is it based on the number of kills? In which case when victory is announced should I be continuing the battle and chasing down as many of the routing enemy as possible?
It is calculated on the number of kill and your casualties.
More kills means more money and also if you get less kills you'll get a few money because your people don't die which means you don't need to wait more time to recruit or wait to get full health-points (HP).
Also I recommended, when you won a battle and you know you can chase them and totally kill them, to pick the option "rescue of captives" or "release captives". You will get money and then you can chase their army again and then choose, if you want, extra leadership for a few turns or less money than before. I recommend choose the first if you want to fight more in the next turns.