Articlegreen2011

Potential model misspecification bias: Formative indicators enhancing theory for accounting researchers

30 citations0/0 files storedThe International Journal of Accounting

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Psychometric Methodologies and Testing Accounting Theory and Financial Reporting Accounting and Organizational Management

Abstract

This paper describes why and when formative factors, in combination with reflective measures, can be used in accounting research to better represent complex theoretical constructs. We argue that the exclusive use of reflective factors constrains theory development and may lead to imprecise measurement. We provide a review of 66 published research papers from Accounting , Organization and Society , The Accounting Review , Contemporary Accounting Research , Auditing: A Journal of Practice & Theory , Accounting , Auditing , & Accountability Journal , Behavioral Research in Accounting , International Journal of Accounting , Journal of Accounting and Public Policy , Management Accounting Research , Abacus , and Journal of Management Accounting Research using Structural Equation Models (SEM) from 1992 to 2008 to illustrate improvement of misspecification bias in leading accounting journals. Our findings suggest that most of the studies modeled constructs that did not include formative indicators.

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1999Use of partial least squares (PLS) in strategic management research: a review of four recent studies 2003A Critical Review of Construct Indicators and Measurement Model Misspecification in Marketing and Consumer Research 2001Index Construction with Formative Indicators: An Alternative to Scale Development 1998Issues and opinion on structural equation modeling 1982Two Structural Equation Models: LISREL and PLS Applied to Consumer Exit-Voice Theory 1991Conventional wisdom on measurement: A structural equation perspective.2006Formative Versus Reflective Indicators in Organizational Measure Development: A Comparison and Empirical Illustration 2005The Problem of Measurement Model Misspecification in Behavioral and Organizational Research and Some Recommended Solutions.

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