Confirmatory Factor Analysis

And

Structural Equation Modelling

By. Vaibhav Agarwal

Ph.D Scholar
ABV-IIITM, Gwalior
Source : (Cho, Bonn and Li, 2019)
Structural Equation Modeling (SEM)

• A multivariate statistical analysis used to explain the relationships among

multiple variables.
• Examines structure of interrelationships expressed in a series of equations just
like regression analysis.
• It is a combination of Multiple Regression Analysis and Exploratory Factor
Analysis.
• It is used to analyze the structural relationship between measured variables and
latent constructs (Dependent and Independent Variables).
 Variables Types

Observed/
Latent Construct/
Variable/Statement/
Variable/ Factor
In software Items In software
represented by represented by

These are These are measured

inferred indirectly directly from the
respondents
Source : (Cho, Bonn and Li, 2019)
Multiple
Indicators
 Variables
Types

Dependent Independent
Endogenous Variables Exogenous Variables
Contains arrow towards them Contains arrow going out from them

Var1 Var2 Var1 Var2

 Types of Structural Equation
Modelling

Co-Variance SEM Partial Least Square

(CB-SEM) (PLS- SEM)
If the goal is theory testing, theory If the research is an extension
confirmation, or comparison of of an existing structural theory,
alternative theories, select CB-SEM. PLS-SEM should be selected
 Structural Equation
Modelling

Measurement Model Path Analysis

Or Or

Confirmatory Factor Analysis Structural Model

Measurement Model
Structural Model
 Measurement Model
or
Confirmatory Factor Analysis

• CFA is a multivariate statistical procedure that is used to test how well the
measured variables represent the number of constructs.
• In exploratory factor analysis (EFA), data is simply explored and provides
information about the numbers of factors required to represent the data.
• In confirmatory factor analysis (CFA), researchers can specify the number of factors
required in the data and which measured variable is related to which latent
variable.
• It is used to confirm or reject the measurement theory.
 Reporting CFA
Results

Regression
Validity Issues Model fit Indices
Results

Construct Chi-square Goodness of fit Badness of fit

p<0.05 Content Validity
Validity Statistics indicator indicator

1. Through ROL Convergent Discriminant CFI, GFI, IFI, NFI,

RMSEA, RMR etc
2. Expert Opinion Validity Validity AGFI etc

1. CR>0.7
1. AVE>MSV
2. AVE>0.5
2. AVE>ASV
3. CR>AVE
 Measurement Model

Reliability Validity

Composite Internal Convergent Discriminant

Reliability Consistency Validity Validity

CR > 0.8 Chronbach’s α Item Loadings if both AVE HTMT

α > 0.7 are significant estimates of a ratio < 0.90
(p value < 0.05 given pair of
Or constructs are
T-value > 2) greater than
and AVE > 0.5 square of the
construct
correlation
Composite Reliability (CR > 0.8)
Internal Consistency (α >0.7)
Convergent Validity

T-value > 2,
All values > 0.7 which means item
loadings are
significant
Alternate way of reporting
Discriminant Validity (Fornell and Larcker, 1981)
Criteria

𝐴𝑉𝐸
 Validation of Structural
Model

R2 Value of Path Co-efficient Corresponding Q2 Value for out-

endogenous β-value level of of-sample
latent variables significance predictive
T-values relevance with
regard to each
endogenous
construct (Q2 > 0)
R2 value and Q2 Value
Path Co-efficient
β-value
Corresponding level of significance for relationships
(T-values > 2)
 Smart PLS 3.0
Data Requirements:
1. Sample Size (Thumb rule of 10)
2. No assumption for Normality
3. Highly robust for missing values
4. Can work with Metric measurement (Interval), Ordinal as well as Binary coded variables.
Some limitations if DV is Categorical var.

Model Characteristics
1. Can work on Reflective as well as Formative models
2. Can work on Single statement factor
3. Work on Recursive models only (No feedback loop allowed e.g.
Leader -> Motivation->Performance->Leader
 Models in
SEM

Reflective Formative
Model Model
Factor1_S1 Factor1_S1

Factor1_S1 Factor1_S1
Factor1 Factor1
Factor1_S1 Factor1_S1

Factor1_S1 Factor1_S1
Model Evaluation:
1. No global Goodness of fit indicator
2. What to see in Measurement Model:
a) What to see in Reflective Model: Convergent Validity, Construct Reliability, Internal Consistency, AVE
Discriminant Validity, Cross Loading, AVE > MSV

b) What to see in Formative Model: Content Validity, Significance value (Which in turn will give idea of Multi-
Collinearity)

3. What to see in Path Model (Structural Part): Significance value, Coefficient of Determination (R2), Effect
Size, Multi-Collinearity

4. Higher Effects: Mediation, Moderation, Interaction

Orders of CFA
Model under Consideration for Practice

Source: (Cho, Bonn and Li, 2019)

 Underlying Hypotheses
H1. Convenience quality of online shopping apps/website has a positive relationship with user-perceived value.
H2. Design quality of online shopping apps/website has a positive relationship with user-perceived value.
H3. Trustworthiness quality of online shopping apps/website has a positive relationship with upon user-perceived
value.
H4. Price quality of online shopping apps/website has a positive relationship with user-perceived value.
H5. Various product choices of online shopping apps/website has a positive relationship with user perceived
value.
H6. User-perceived value has a positive relationship with attitudes towards online shopping apps/website.
H7. User-perceived value has a positive relationship with intention to continuously use online shopping
apps/website.
H8. Attitudes towards online shopping apps/ website has a positive relationship with intention to continuously use
online shopping apps/website.
The End