A Handbook on SEM 2nd Edition

Zainudin Awang - Universiti Sultan Zainal Abidin

CHAPTER 4

ANALYZING THE SEM STRUCTURAL MODEL

After the researchers have reported the Unidimensionality, Validity, and Reliability of all
constructs involved in the study, the next step is to model these constructs into structural model
for analysis using SEM. The normal practice is to assemble the constructs from left to right.
Begin with the exogenous constructs on the left, followed by the mediating construct (if any) in
the middle, and finally the endogenous construct on the far right.

The arrow to link the constructs is determined by the direction of hypotheses. The single headed
arrow is used to indicate the causal effects, while the double headed arrow is used to test the
correlational effects among the constructs. With SEM, the researcher could model and analyze
the multiple relationships among the constructs simultaneously.

4.1 STEPS INVOLVED IN PERFORMING THE STRUCTURAL

EQUATION MODELING (SEM)
There are six steps involved in analyzing the Structural Equation Modeling (SEM).
1. Specify the schematic diagram of the research model (developed based on theory).
2. Convert the schematic diagram of research into AMOS Graphic (structural model).
3. Collect data: Items for latent constructs are measured using interval scale. The item could
be in the form of statement in a questionnaire.
4. Perform the CFA for measurement models of the latent constructs. This has been discussed
in Chapter 3. Remember: No need to assess CFA for observed variables.
5. Assemble the AMOS structural model. Make sure the residual terms and reference point
are put accordingly. Input data and execute the model.
6. Obtain the AMOS Graphic output for the standardized and unstandardized estimate. Verify
the direction of relationship between constructs conform to theory.
Lastly, obtain the AMOS text output of the estimates. Assess the significance of the path
analysis. Interpret the results according to the stated research hypotheses.

74
 A Handbook on SEM 2nd Edition
Zainudin Awang - Universiti Sultan Zainal Abidin

4.2 PERFORMING THE STRUCTURAL EQUATION MODELING

For the sake of continuation, we will be using the same example that was used in the previous
chapter. The step by step explanation is made for every procedure. Using the example, let’s
begin the steps in performing SEM:

Step 1 Specify the schematic diagram of the research model (based on the theory)

Suppose the schematic diagram for the model in the study is presented in Figure 1.

Figure 1: The schematic diagram of the model in a study

Note: X1 and X2 are the latent exogenous constructs, while Y is the latent endogenous construct in
the model. There is no mediating construct involved in this particular study. The oval shapes are
used to model the latent constructs of X1, X2, and Y.

75
 A Handbook on SEM 2nd Edition
Zainudin Awang - Universiti Sultan Zainal Abidin

Step 2 Draw the structural model based on the specified diagram. Include all
items for every construct in the structural model

The representation of schematic diagram in AMOS syntax is given in Figure 2.

Figure 2: The representation of a schematic diagram of the model in AMOS Graphic

Note: Latent construct X1 is measured using five items namely X11, X12, X13, X14, and X15.
Latent construct X2 is measured using four items namely X21, X22, X23, and X24.
Latent construct Y is measured using four items namely Y1, Y2, Y3, and Y4.
The residual term is needed for construct Y since it is an endogenous construct.

76
 A Handbook on SEM 2nd Edition
Zainudin Awang - Universiti Sultan Zainal Abidin

Step 3 Perform the CFA for the measurement model of latent constructs

The CFA procedure for measurement model of latent constructs have been explained in
the previous chapter. The resulted measurement models after CFA are assembled into
structural model as shown in Figure 3. Make sure all constructs have the reference point
at one of its items. The residual term is required for every endogenous construct.

Residual term

Figure 3: The constructs are assembled into Structural Model for path analysis

77
 A Handbook on SEM 2nd Edition
Zainudin Awang - Universiti Sultan Zainal Abidin

Step 4 Execute the structural model. Choose the required output for the structural
model in the “output” menu. Obtain the standardized regression weights
and observe the fitness indexes.

The researcher could still modify the structural model if certain fitness index is not achieved.
The structural model in Figure 3 is executed after inputting data for the respective items (click
and drag procedure) and selecting the required analysis procedure to perform.
The standardized estimate for the model is presented in Figure 4, while the unstandardized
estimate is presented in Figure 5. Their corresponding fitness indexes and assessment is
presented in Table 1.

Standardized Beta
Factor Loading

Item R2

Correlation between
Exogenous Constructs

Figure 4: The Standardized Path Coefficients between constructs in the model

Note: As shown in Figure 4, the standardized beta estimate for effect of X1 on Y is 0.45, while
the standardized beta estimate for X2 is 0.19.

78
 A Handbook on SEM 2nd Edition
Zainudin Awang - Universiti Sultan Zainal Abidin

The measure of correlation between exogenous constructs X1 and X2 is 0.59. This value is
important since it indicates that the discriminant validity between exogenous constructs is
achieved, thus the two exogenous constructs are not redundant (correlation is below 0.85).

The value of coefficient of determination R2 is 0.33. The figure indicates the contribution of
exogenous constructs X1 and X2 in estimating the endogenous construct Y is 33%.

Table 1: The Fitness Indexes assessment for the structural model in Figure 4
Name of category Name of index Index value Comments
1. Absolute fit RMSEA 0.065 The required level is achieved
Absolute fit GFI 0.949 The required level is achieved
2. Incremental fit CFI 0.985 The required level is achieved
3. Parsimonious fit Chisq/df 2.332 The required level is achieved

Regression Residual Variance

Weight

Actual Beta Variance in

measurement error

Figure 5: The Regression Path Coefficients between constructs in the model

79
 A Handbook on SEM 2nd Edition
Zainudin Awang - Universiti Sultan Zainal Abidin

Step 5 Obtain the AMOS text output: Examine both the standardized and
regression path coefficients. Interpret the results and make a decision
concerning the hypothesized relationships.
AMOS gives two sets of text output namely the standardized regression weights and the
regression weights. The text output explaining the results in Figure 4 are presented in
Table 2, Table 3 and Table 4.
While the text output explaining the results in Figure 5 are presented in Table 5, Table
6 and Table 7.

4.2.1 Interpreting the AMOS Text Output: The Standardized

Path Coefficients

Table 2: The Standardized Regression Weight as Shown in Figure 4

Path Path Standardized Beta Estimate Comment
Y <--- X2 0.190 Standardized beta
Y <--- X1 0.450 Standardized beta

The definition for the standardized regression weight is given below.

Extracted from Table 2:

Path Path Standardized Beta Estimate
Y <--- X2 0.190

When X2 goes up by 1 standard deviation, Y goes up by 0.19 standard deviations.

Extracted from Table 2:

Path Path Standardized Beta Estimate
Y <--- X1 0.450

When X1 goes up by 1 standard deviation, Y goes up by 0.45 standard deviations.

80
 A Handbook on SEM 2nd Edition
Zainudin Awang - Universiti Sultan Zainal Abidin

Table 3: The Correlation Estimate for each Pair of Exogenous Construct

Construct Construct Estimate

X1 <--> X2 0.59

The correlation between latent construct X1 and X2 is estimated to be 0.59

*The measure of correlation indicates that the strength of the relationship between the
two latent exogenous constructs (X1 and X2) is not strong. In this case, the researchers could
continue with further analysis.

***Caution: If the measure of correlation is higher than above 0.85, the two latent exogenous
constructs (X1 and X2) are highly correlated, and the discriminant validity failed. Thus the
researcher could not treat the two exogenous constructs separately since they are redundant. In
order to avoid redundancy, the researcher should drop one of these two exogenous constructs (X1
and X2) for further analysis.

Table 4: The Squared Multiple Correlations (R2)

Variable Estimate (R2)

Y 0.330

The definition for the squared multiple correlations are given below.
It is estimated that the predictors of Y explain 33.0 percent of its variance. In other words,
the error variance of Y is approximately 67.0 percent of the variance of Y itself.

81
 A Handbook on SEM 2nd Edition
Zainudin Awang - Universiti Sultan Zainal Abidin

4.2.2 Interpreting the AMOS Text Output: The Regression Path

Coefficients
Table 5: The Regression Weight for X1 and X2 in predicting Y
The actual beta values S.E. C.R. P-value
Y <--- X1 0.682 0.106 6.433 0.001

Y <--- X2 0.188 0.062 3.032 0.002

***indicate a highly significant at < 0.001

Extracted from Table 5: Estimate of Regression Weight for X1

The actual beta value S.E. C.R. P-value
Y <--- X1 0.682 0.106 6.433 0.001

Definition for actual beta 0.682: When X1 goes up by 1 unit, Y goes up by 0.682 units.

Definition for Standard Error of regression weight 0.106: The regression weight estimate, 0.662
has a standard error of about 0.106.

Definition for Critical Ratio for regression weight: Dividing the regression weight estimate by
the estimate of its standard error gives z = 0.662/0.106 = 6.433. In other words, the regression
weight estimate is 6.433 standard errors above zero.

Definition for Level of significance for regression weight: The probability of getting a critical
ratio 6.433 in absolute value is less than 0.001. In other words, the regression weight for X1 in
the prediction of Y is significantly different from zero at the 0.001 level (two-tailed test).

Extracted from Table 5: Estimate of Regression Weight for X2

The actual beta value S.E. C.R. P-value
Y <--- X2 0.188 0.062 3.032 0.002

Definition for actual beta 0.188: When X2 goes up by 1unit, Y goes up by 0.188 unit.

Definition for Standard Error of regression weight 0.062: The regression weight estimate
of 0.188 has a standard error of about 0.062.

82
 A Handbook on SEM 2nd Edition
Zainudin Awang - Universiti Sultan Zainal Abidin

Definition for Critical Ratio for regression weight: Dividing the regression weight
estimate by the estimate of its standard error gives z = 0.188/0.062 = 3.032. In other words, the
regression weight estimate is 3.032 standard errors above zero.

Definition for Level of significance for regression weight: The probability of getting a
critical ratio 3.032 in absolute value is 0.002. In other words, the regression weight for X2 in the
prediction of Y is significantly different from zero at the 0.05 level (two-tailed test).

4.2.3 Interpreting the AMOS Text Output: The Standardized

Residual Covariance
The researcher could examine the output of Standardized Residual Covariance as a
guide to examine the “wellness” of the structural model. The residual covariance is the
difference between the sample covariance and the model-implied covariance. The model is
correctly specified if most of the standardized residuals are less than two in absolute value.
Table 6 present the standardized residual estimate for the above structural model.

Table 6: The Standardized Residual Covariance: the standardized difference between sample
covariance and model-implied covariance.
Y4 Y3 Y2 Y1 X15 X14 X13 X12 X11 X24 X23 X22 X21
Y4 .000
Y3 .740 .000
Y2 -.144 -.020 .000
Y1 -.265 -.106 .055 .000
X15 -.478 .034 -.401 -.106 .000
X14 .183 .931 .821 1.08 -.045 .000
X13 -.866 -.342 -.762 -.283 .281 -.092 .000
X12 .346 .394 .139 .700 -.568 .167 -.574 .000
X11 .523 .751 .392 .753 -.479 .095 -.625 4.91 .000
X24 3.14 3.29 3.54 3.94 1.68 1.78 2.03 1.78 3.20 .000
X23 2.37 2.98 2.79 3.39 .518 .193 .146 1.36 1.76 3.77 .000
X22 -.487 -.116 -.251 .459 -.508 .025 -.223 1.20 2.31 -.425 -.161 .000
X21 -1.04 -.702 -1.04 -.172 -.427 -.233 -.230 .994 1.43 -.300 -.271 .070 .000

The researcher could employ the standardized residual estimates as an alternative option to
delete the “poor item” from the construct in the model. The “poor item” is the item that does not

83
 A Handbook on SEM 2nd Edition
Zainudin Awang - Universiti Sultan Zainal Abidin

contribute in estimating the respective latent construct. These items caused the measurement
model to have a poor fit. Based on the standardized residual covariance matrix, the researcher
needs to delete item X23 and item X24 from the structural model.

4.3 An Example of More Complicated Amos Output

Sometime the results of the structural model are quite complicated to read and interpret,
especially for the beginners. As an example, the result in Figure 6 shows the Standardized
Regression Weights for the Event Loyalty Model.
The most important output in the Standardized Regression Weight is the value of R2 for
the model. In Figure 6, one could find that the value of R2 for the whole model is 0.89 (this value
is located at the endogenous construct). By looking at this value, one could conclude that the
model is good since it could capture 89% of the estimate on endogenous construct by including
certain exogenous constructs in the model. At the same time, the fitness indexes are good and the
factor loading for all items are good (above the required 0.6)

84
 A Handbook on SEM 2nd Edition
Zainudin Awang - Universiti Sultan Zainal Abidin

Figure 6: The Standardized Path Coefficients for the structural model

The output in Figure 6 indicate that 89% of the performance in Event Loyalty could be estimated
by using three exogenous constructs into the model namely Service Performance, Perceived
Quality, and Customer Emotion into the model. At the same time, 47% of the Customer Emotion
could be measured by using Service Performance and Service Quality.

The actual Regression Weights are presented in Figure 7. The value of regression weight
indicates the effect of an exogenous construct on its corresponding endogenous construct. As has
been explained earlier, one could differentiate exogenous construct from endogenous based the
one sided arrow. Remember, one-sided arrow represent the causal effect of an exogenous

85
 A Handbook on SEM 2nd Edition
Zainudin Awang - Universiti Sultan Zainal Abidin

construct (arrow pointing out) on its corresponding endogenous construct (arrow pointing in).
Amos Graphic also produced the text output for the researcher to test the required hypothesis.

Figure 7: The Path Regression Path Coefficients for the structural model

86
 A Handbook on SEM 2nd Edition
Zainudin Awang - Universiti Sultan Zainal Abidin

Table 7: The Regression Path Coefficients and its significance based on p-value < 0.05

Construct Construct Estimate S.E. C.R. P Result

Event_Loyalty <--- Service_Performance 0.154 .057 2.694 .007 significant
Emotion <--- Service_Performance 0.371 .086 4.292 *** significant
Event_Loyalty <--- Perceived_Quality 0.132 .047 2.783 .005 significant
Emotion <--- Perceived_Quality 0.388 .069 5.608 *** significant
Event_Loyalty <--- Emotion 0.272 .060 4.561 *** significant

Table 8: The hypothesis statement for every path and its conclusion

Hypothesis Statement Decision

H1 Service Performance has a positive and significant effect on Event Loyalty Supported

H2 Service Performance has a positive and significant effect on Emotion Supported

H3 Perceived Quality has a positive and significant effect on Event Loyalty Supported

H4 Perceived Quality has a positive and significant effect on Emotion Supported

H5 Emotion has a positive and significant effect on Event Loyalty Supported

87