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 A Handbook on SEM
Zainudin Awang - Universiti Sultan Zainal Abidin

CHAPTER 1

INTRODUCTION TO STRUCTURAL
EQUATION MODELING
The Structural Equation Modeling or popularly known as SEM is a second generation statistical
analysis techniques developed for analyzing the inter-relationships among multiple variables in a
model. The inter-relationships among variables could be expressed in a series of single and
multiple regression equations. The Structural Equation Modeling technique employs the
combination of quantitative data and the correlational or causal assumptions into the model.

SEM is a more powerful statistical technique to solve the following requirements:

1) Running the Confirmatory Factor Analysis (CFA)

2) Analyzing multiple regression models simultaneously
3) Analyzing regressions with multi-collinearity problem
4) Analyzing the path analysis with multiple dependents
5) Estimating the correlation and covariance in a model
6) Modeling the inter-relationships among variables in a model

1.1 THE CONCEPT OF SEM AND HOW IT WORKS

SEM begins with a theory where the researcher intends to test the relationship among constructs
of interest in the study. The relationships are modeled into a theoretical framework represented
by a schematic diagram. The schematic diagram presents the hypotheses of interest to be tested
in the study. The constructs of interest involved are measured using a set of items in a
questionnaire. The measurement scale for each item should be either interval or ratio. The ideal
measurement should be in the interval from 1 to 10 so that the data is more independence and
thus meet the requirement for parametric analysis. The researcher should develop at least four
items to measure each latent construct.

Throughout the chapter, the readers would find the term variable and construct are used
interchangeably. A variable is the directly measured score, while the construct is meant for an
indirectly measured score. In fact the construct is only a hypothetical concept of something, or
the respondents’ perception concerning certain issue. A construct is measured through the
respondent’s response towards a set of items in a questionnaire.

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1.2 THE ADVANTAGES OF SEM COMPARED TO OLS

Structural Equation Modeling or SEM is capable of estimating a series of inter-relationships

among latent constructs simultaneously in a model. In fact, SEM is the most efficient method to
handle the Confirmatory Factor Analysis (CFA) for measurement models, analyze the causal
relationships among latent constructs in a structural model, estimating their variance and
covariance, and test the hypotheses for mediators and moderators in a model.

As has been said earlier, latent constructs could not be measured directly since it is only a
hypothetical concept of something. Thus, the researcher could not model them using the
Ordinary Least Squares (OLS) regression. The examples of latent constructs measured through a
set of items are in a questionnaire are:

1) Service Quality
2) Customer Satisfaction
3) Job Satisfaction
4) Corporate Image
5) Product Image
6) Customer Loyalty
7) Purchase Intention
8) Consumer Behavior
9) Employee Soft Skills
10) Perceived usefulness
11) Relational bond
12) Financial bond
13) Structural bond
14) Relationship quality
15) Attitudinal loyalty
16) Behavioral loyalty

Those constructs cannot be measured directly like counting the number of kids in a family,
total income of a household, monthly phone bills, daily production, weekly price of chicken, etc.
The variable which could be measured directly is called the observed variable, while the variable
which could not be measured directly is called latent construct. These latent constructs could
only be measured indirectly using a set of items in a questionnaire.

Example of items in a questionnaire to measure student satisfaction as a latent construct:

In this example, the construct Students Satisfaction is measured using eight items in a
questionnaire.

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As a student of this university, I….. Strongly Strongly

Disagree Agree
1 am satisfied with the lecture schedules 1 2 3 4 5 6 7 8 9 10
2 am satisfied with the learning process 1 2 3 4 5 6 7 8 9 10
3 am satisfied with the academic system 1 2 3 4 5 6 7 8 9 10
4 am satisfied with the continuous evaluation 1 2 3 4 5 6 7 8 9 10
5 am satisfied with academic regulations 1 2 3 4 5 6 7 8 9 10
6 am satisfied with the library references 1 2 3 4 5 6 7 8 9 10
7 am satisfied with classroom facilities 1 2 3 4 5 6 7 8 9 10
8 am satisfied with the campus security 1 2 3 4 5 6 7 8 9 10
Source: Research Methodology and Data Analysis 2 nd Edition by Zainudin Awang (2012)

Other advantages of Structural Equation Modeling (SEM):

1) Could run the Confirmatory Factor Analysis (CFA) to reduce measurement errors
2) Could deal with the problem of multi-collinearity among independent constructs
3) Could assess the fitness of measurement model as well as the structural model
4) Could analyze the model with multiple independents as well as multiple dependents
5) Could include the mediating variable in a model and analyze its effects (mediator)
6) Could analyze the effects of moderating variable in certain path of a model(moderator)
7) Could model the error terms and handle the correlated errors among response items
8) Could analyze both First Order and Second Order Constructs in the structural model
9) Could include both observed variables and latent constructs in the structural model

1.3 Converting Regression Models into AMOS Graphic

Modeling the simple linear regression Y = Bo + B1X1 + e1 in AMOS graphic

Usually, the researchers could model the above equation using Ordinary Least Squares
(OLS) regression and analyze the model using ANOVA since X1 and X2 are observed variables.
However, the researchers could also employ AMOS graphic software to model and analyze the
regression equation as shown in Figure 1.

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Observed
Residual
e1
Variable

1
β1

X1 Y

Figure 1: The Simple Regression model in AMOS Graphic

Key: X1 = Independent variable (observed), Y = Dependent variable (observed), e1= error in the
equation or residuals (unobserved).

Note: In Figure 1, the researcher is interested to estimate the causal effect of X1 on Y and
subsequently test the hypothesis to prove of its significance. In Figure 1, both X1 and Y are
observed variables. In Amos, the observed variables are represented using rectangles.
Modeling the Multiple Linear Regression Y = Bo + B1X1 + B2X2 + B3X3 + e1
The researchers could model the above equation using Ordinary Least Squares (OLS)
regression and analyzed the model using ANOVA. However, the researchers could also employ
AMOS to model the equation as shown in Figure 2 below.

X1 e1
1

X2 Y

X3

Figure 2: The Multiple Regression models in AMOS Graphic

Note: X1, X2, X3, and Y are represented by rectangles since they are directly observed variables

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1.4 The Concept of Latent Constructs in Research

The Simple Regression with multiple indicators to analyze latent constructs

In science and social science researches, most of the times the researchers are dealing
with latent constructs. As has been said earlier, these constructs are measured using a set of items
in a questionnaire. Since the OLS procedures could not entertain latent constructs, the
researchers need to employ SEM for the analysis. Using SEM, the researcher could model the
relationship among these constructs together with their respective items in the model and analyze
them simultaneously.
In this case, at least two measurement models involved – one for independent construct
and the other one is for dependent construct. The theorized link between measurement model for
independent construct and measurement model for dependent construct is called a structural
model. Thus, instead of modeling the Ordinary Least Squares regression (OLS) and analyzed
using ANOVA, the researcher is working with the Structure Equation Modeling (SEM) and
analyzed using AMOS as shown in Figure 3.

e1 e2 e3 e4 e5 e6 e7 e8 e9 e10

1 1 1 1 1 1 1 1 1 1

X11 X12 X13 X14 X15 Y1 Y2 Y3 Y4 Y5

1 1

1
X1 Y e11

Figure 3: The structural equation model for analyzing latent constructs in a model

Note: X1 and Y are latent constructs. In Amos syntax, latent constructs are represented by
the ellipses. The latent construct X1 is measured using items X11 to X15, while latent construct Y
is measured using items Y1 to Y5. The measured items are represented by rectangles in the
model. Sometimes (in literature) the measured items are called latent indicators.
Key: X1 = Exogenous construct, while X11 to X15 is a set of 5 items to measure latent construct X1
In the Amos diagram, e1 to e5 are errors in measurement for items X11 to X15
Y = Endogenous construct, while Y1 to Y5 is a set of 5 items to measure latent construct Y
In the Amos diagram, e6 to e10 are errors in measurement for items Y1 to Y5
In the Amos diagram, e11 is an error in the equation or the residual.

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1.5 THE MINIMUM SAMPLE SIZE REQUIRED FOR SEM

There are endless debates in the literatures as to how many respondents should be obtained in
order to employ SEM. However, there is no clear-cut answers to it since every research differs
(among other things) in term of the population characteristics, and the number of constructs
employed in a model. Hair et al. (2010), offer the following suggestion for minimum sample size
depending on the model complexity and basic measurement model characteristics.

Model Characteristics Minimum Sample

(Number of latent constructs and items) Required
1. Five or less latent constructs. Each latent construct has more than three 100 sample
measuring items
2. Seven or less latent constructs. Each construct has more than three items 150 sample
3. Seven or less latent constructs. Some constructs have less than three items 300 sample
(just identified model)
4. More than seven latent constructs. Some constructs have less than three 500 sample
items (just identified model)

1.6 INTRODUCTION TO AMOS SOFTWARE

AMOS is an acronym for Analysis of Moments Structure – the software developed for analyzing
the Structure Equation Modeling (SEM). Synonym to SEM is Covariance Structure Analysis or
Covariance Structure Modeling. Other software available to analyze SEM includes LISREL,
SEPATH, PRELIS, SIMPLIS, MPLUS, EQS, and SAS. The advantage of AMOS compared to
other software in its class is its graphics representation of the model. So, instead of writing
instructions through computer program, researchers only need to draw the AMOS graphic
identical to the schematic diagram of a model in the study.

AMOS software could be utilized to explore statistical relationships among the items of
each construct and also between constructs. Using AMOS, the researcher can specify, estimate,
assess, and present the model in a causal path diagram to show the hypothesized relationships
among constructs of interest. The empirical model can be tested against the hypothesized model
for goodness of fit. If the researchers found any path that does not fit with the original model,
they could either modify the path to improve the fitness of the model or remove that particular
path completely from the hypothesized model.

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1.7 The Variable Terms in SEM using AMOS Graphic

The explanation below refers to Figure 4.

1. Exogenous construct is the independent variable in the Ordinary Least Squares (OLS)
regression. In AMOS, the independent variable is drawn as an upstream variable with the
causal arrow pointing out to its corresponding dependent variable.

In Figure 4: X1 and X2 are exogenous construct with five response items. The arrows from
exogenous constructs X1 and X2 are pointing out to their endogenous construct Y to indicate
that X1 and X2 are theorized to have some causal effects on Y.

2. Endogenous construct is the dependent variable in the Ordinary Least Squares regression.
In AMOS, the dependent variable is drawn as a downstream variable with the arrow pointing
in from its corresponding independent variable.
In Figure 4: Y is an endogenous construct with five response items.

3. Mediating construct is the variable which has a double role. This variable acts as a
dependent variable in the first equation, and acts as an independent variable in the second
equation. In theory, the mediator mediates the relationship between an independent variable
and a dependent variable. In Figure 4, M is the mediating construct with five response items.
It has a residual term R2 as a result from arrow pointing in from X1 and X2.
Remember: A mediator can be a variable as well as a construct.

4. Moderating variable is the variable that moderates the relationship between and
independent variable and its corresponding dependent variable. The representation for
moderating variable is not shown in Figure 4 since it is not part of the model.
Remember: Unlike the mediator, the moderator is not part of the model. The researcher only
identifies the relationship path where the moderator is to be tested and the testing procedure
will be carried out accordingly.

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Exogenous
Construct

Residual

Mediator Endogenous
Construct

Measurement Error

Figure 4: The sequence of constructs assembled in a model in AMOS Graphic

Note: X1 and X2 are exogenous constructs while Y is an endogenous construct. All constructs are latent.

5. Error in measurement - an error depicted from each measuring item of a variable.

In Figure 4 – we can see that e1 to e5 are the measurement errors for items X11 to X15
respectively in construct X1, e6 to e10 are the measurement errors for items X21 to X25 in
construct X2, while e16 to e20 are the measurement errors for items Y1 to Y5 in construct Y.

6. Error in equation – a residual in the respective regression equation. In Figure 4 – we can

see that R1 is the residual for the equation Y = f(X1, X2) or Y = Bo + B1X1 + B2X2 + R1

Remember: The numbering for measurement errors as well as residuals in the model are
assigned randomly by Amos Graphic. Do not worry of you got different numbers!

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1.8 MODELING THE OBSERVED AND UNOBSERVED

VARIABLES IN AMOS Graphic

Let X1 and X2 be independent variables while Y is a dependent variable in a multiple

regression model. Both variables are directly observed. The researcher could model this multiple
regression in AMOS Graphic as shown in Figure 5

X1
1
Y e1

X2

Figure 5: Modeling the observed variables in AMOS Graphic for multiple regression models

The model in Figure 5 is equivalent to the following model in a multiple regression equation:

Y = Bo + B1X1 + B2X2 + e1

This model in Figure 5 is valid and workable only if the independent variables X1 and X2
do not have a multi-collinearity problem between them. Remember, one of the main assumptions
in the Ordinary Least Squares (OLS) is no significant multi-collinearity exists between the
independent variables. The Structural Equation Modeling (SEM) technique could deal with the
multi-collinearity problem. In fact, AMOS requires the researcher to estimate the correlation
between independent variables as well as between exogenous constructs.

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e1 e2 e3 e4 e5
Residual
1 1 1 1 1

X11 X12 X13 X14 X15

1
e15

X1 1 1
1 Y1 e11

1
Y Y2 e12

1
Y3 e13
X2
1

Response Item
X21 X22 X23 X24 X25
1 1 1 1 1

e10 e9 e8 e7 e6 Error in Measurement

Figure 6: Modeling the latent constructs in the multiple regression models

As shown in Figure 6, the latent constructs X1 and X2 are measured using five
questionnaire items respectively while the latent variable Y are measured using three
questionnaire items. However, in reality each latent construct could be measured using as many
as ten to twenty questionnaire items.

The modeling in Figure 6 is valid only if the latent variables X1 and X2 do not have
significant multi-collinearity problem between them. Remember, the main assumption for
Ordinary Least Squares Regression (OLS) is no significant multi-collinearity exists among the
independent variables or exogenous constructs in a model.

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Taking multi-colllinearity problem into perspective, AMOS software requires the

researcher to estimate the covariance between independent variables or between exogenous
constructs in a model. The program would not run until the researchers employ the double-
headed arrow to link the pair of exogenous constructs in a model to set the pair as “free
parameter estimates” concerning the multi-collinearity effects between them. The application of
double headed arrow linking two independent variables is shown in Figure 7.

However, if the correlation between X1 and X2 is greater than 0.85, then the assumption
of discriminant validity has failed. It means, one variable is like the mirror of the other. Thus, the
researcher needs to drop one of the two variables from the model and continue analysis using a
single variable.

X1

1
Y e1

X2

Figure 7: Modeling the multiple regressions and estimating the correlation between independent
variables in AMOS Graphic

If the reader could still recall, the double-headed arrow is used to estimate the
correlational relationship while the single-headed arrow is used to estimate the causal
relationship. In the model shown in Figure 7, the researchers could test the significance of
covariance between X1 and X2. At the same time, the researchers could also test the significance
of causal effect of X1 on Y, and also the causal effect of X2 on Y. All tests are carried out
simultaneously.

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e1 e2 e3 e4 e5
1 1 1 1 1

X11 X12 X13 X14 X15

1
e15

Exogenous
X1 Construct
1 1
1 Y1 e11

1
Y Y2 e12

1
Y3 e13
X2
1
Endogenous
Construct

X21 X22 X23 X24 X25

1 1 1 1 1

e10 e9 e8 e7 e6

Figure 8: Modeling the multiple regressions and estimating the correlation between exogenous
constructs in AMOS Graphic
The analysis of correlational and causal relationship for the model in Figure 8 is
equivalent to the analysis stated in Figure 7. The advantage of analysis as stated in Figure 8 is the
researcher could assess the importance of each item in measuring their underlying latent
construct. In the easier terms, the researcher could assess which item contributes more
information in measuring their respective construct. In SEM, the researchers could even test the
significance of each response item on its respective construct.

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1.9 Modeling Multiple Variables in AMOS Graphic:

The Multiple Regression Model

The Multiple Regression Analysis Y = Bo + B1X1 + B2X2 + B3X3 + e1

Again, the researchers could model the observed variables using Ordinary Least Squares
(OLS) regression and analyzed using ANOVA. For the same problem, the researchers could
model the equation in AMOS software as shown in Figure 9. The result of two methods would
be identical. However, the output from AMOS is much more informative and friendly.

X1
e1
1

X2 Y

X3

Figure 9: The multiple regression models for the observed variables in AMOS Graphic

Key: X1, X2, X3 = Independent variables, Y = Dependent variable, e1= residual

The Multiple Regression Models for Latent Constructs

AMOS Graphic can model the relationship among latent constructs with multiple items.
In this case, more than one measurement model involved. The researchers need to validate each
of these measurement models prior to running structural model. Thus, instead of modeling the
OLS, the researchers are modeling SEM as shown in Figure 10.

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e1 e2 e3 e4 e5
1 1 1 1 1

X11 X12 X13 X14 X15

1

X1
1 1
e6 X21 e21 Y1 e16
1
1 1 1
e7 X22 Y2 e17

1 1
e8 X23 X2 Y Y3 e18

1 1
e9 X24 1 Y4 e19

1 1
e10 X25 Y5 e20

X3
1

X31 X32 X33 X34 X35

1 1 1 1 1

e11 e12 e13 e14 e15

Figure 10: The Structural Equation Modeling for the latent constructs in AMOS Graphic

Key: X1 = Exogenous latent construct, X11 to X15 = a set of 5 items to measure X1

e1 to e5 = error in measurement for items X11 to X15
X2 = Exogenous latent construct, X21 to X25 = a set of 5 items to measure X2
e6 to e10 = error in measurement for items X21 to X25
X3 = Exogenous latent construct, X31 to X35 = a set of 5 items to measure X3
e11 to e15 = error in measurement for items X21 to X25
Y = Endogenous latent construct, Y1 to Y5 = a set of 5 items to measure Y
e16 to e20 = error in measurement for items Y1 to Y5
e21= residual

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1.10 Modeling the Mediator Variable in AMOS Graphic

Once the regression relation exists and the direct effect of X1 on Y is significant, the
researchers could determine a variable that mediates the relationship between X1 and Y. This
variable is called a mediator. The role of a mediator is providing an indirect effect of X1 on Y.
Thus, the researcher needs to test the significance of a mediator in the X1 and Y relationship. The
method of path analysis using OLS is quite tedious. However, the testing procedure of path
analysis is much easier in SEM. Let X1, Y and M be and independent variable, dependent
variable, and a moderator variable respectively. Refer to Figure 11.

To begin with, the simple effect of X1

on Y has to be significant

Mediator

Mediator M enters the model.

Figure 11: Modeling the mediator variable M in AMOS Graphic.

In Figure 11, X1 is an independent variable, Y is a dependent variable, and M is a mediating
variable. All variables in the model are directly observed.
The regression equations involved:
Y = Bo + B1X1 + B2M + e2 ...(1)
Y = Bo + B1X1 + e2 ...(2)
Y = Bo + B2M + e2 ...(3)
M = Bo + B3X1 + e3 ...(4)

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Using OLS, the researcher needs to analyze the four regression equations separately in
determining the mediating effect of M. The analysis would be quite tedious.

However, in SEM the researcher could include those four regression equations
simultaneously in one model. Even, the researcher could convert the schematic diagram into a
model in AMOS. Furthermore, the output from AMOS and the subsequent analysis is simple,
informative, and presentable. Now let’s discuss in detail the process involved in testing the effect
of mediating variable. Our discussion centers on the schematic diagram showing the mediating
variable in a model, as shown in Figure 12. In the diagram, the researcher is interested to assess
the effects of mediator variable M in linking the relationship between X1 and Y.

0-1

Key: The coefficient B1 would reduce when the mediator M

enters in the model. If it reduces and become non- significant,
then the full mediation occurs. However, if it reduces but still
significant, then the partial mediation occurs. As for B2 and B3,
both of them must be significant for a mediation to occur.

Figure 12: The Diagram Showing B1, B2, and B3 in the Analysis for Mediator Variable

The schematic diagram in Figure 12 reveals the following regression equations.

Y = Bo + B1X1 + e is the path from X1 to Y (represented by B1)
Y = Bo + B2M + e is the path from X2 to Y (represented by B2)
M = Bo + B3X1 + e is the path from X1 to M (represented by B3)
The path analysis to assess the effect of M in mediating the relationship between X1 and Y
could result in one of the three following possibilities:

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1. M plays a complete mediation role in the relationship between X1 and Y

2. M plays a partial mediation role in the relationship between X1 and Y
3. M plays no mediation role in the relationship between X1 and Y
The complete mediation role of M occurs only if these conditions are met:
Refer to Figure 12:

1. The hypothesis testing for regression coefficient B1 is not significant

2. The hypothesis testing for regression coefficient B3 is significant
3. The hypothesis testing for regression coefficient B2 is significant

The partial mediation role of M occurs only if these conditions are met:
Refer to Figure 12:

1. The hypothesis testing for regression coefficient B1 is still significant

2. The hypothesis testing for regression coefficient B3 is significant
3. The hypothesis testing for regression coefficient of B2 is significant
4. The absolute value of B3 x B2 is higher than the absolute value of B1
The no mediation role of M occurs if at least one of these three conditions is met:
Refer to Figure 12:

1. The hypothesis testing for regression coefficient B3 is not significant

2. The hypothesis testing for regression coefficient B2 is not significant
3. Both regression coefficients namely B2 and B3 are not significant

Question: What if both coefficients B3 and B2 are significant but B3*B2is lower than B1?
In this case, one needs to compare the value of B1 in the single model (X1 alone) with its
value when the mediator M enters the model. If its value is reduced when the mediator is
included, then the partial mediation occurred.

AMOS could also analyze the mediating effects of latent construct in a model. The
theoretical model is illustrated in Figure 13. In the model, construct X1 has five items; the
mediator M also has five response items, while Y has three response items respectively.

In Figure 13, the researcher is modeling the mediating effect of construct M in linking the
relationship between construct X1 and construct Y. So, in this diagram, X1 is an exogenous
construct (arrow pointing out), and Y is an endogenous construct (arrow pointing in) while M is
a mediating construct (two arrows involved - one is pointing in and another one is pointing out).
In this model, the researcher is interested to assess whether construct M is a really a significant
mediator in the X1 to Y relationship.

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Figure 13: Modeling the mediating effect of latent construct M in AMOS Graphic.

The hypothesis testing involved in determining whether construct M has full mediation,
partial mediation, or no mediation role is similar to the explanation given for Figure 12. In Amos
Graphic, one can model more than mediator in a model. The model with more than one mediator
is shown in Figure 13a. In Figure 13a, the independent variable (Leverage) and dependent
variable (Demand) are observed directly while the two mediators are latent constructs.

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Figure 14: The model contain more than one mediators namely RTP and Attitude

1.11 Modeling the Moderating Variable in AMOS Graphic

Sometimes the researcher is also interested to assess the moderating effects of certain
variable in the model, normally demographic characteristics of the respondents. As its name
implies, the role of a moderator variable is to moderate the relationship between the independent
and its corresponding dependent variable. The position of a moderating variable in a schematic
diagram of a model is presented in Figure 14:

Figure 14: The moderating variable M in a schematic diagram of a model

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If you could recall from the earlier explanation, the single headed arrow originating from
the independent variable and pointing to its dependent variable indicates the causal effects of X
on Y is being estimated. Now, the existence of variable M in the path could play a significant
role in altering the effects of independent variable X on its corresponding dependent variable Y.
For example, the effectiveness of certain teaching method in improving the academic
performance of school children could depend on the background of the respondents under study.
Here, teaching method applied is an independent variable, academic performance is a dependent
variable, while background or demographic characteristics of the children is a moderating
variable. Let see how the above theory is presented in a schematic diagram of a model as shown
in Figure 15:

Figure 15: The moderating variable M in a schematic diagram of a model

Analyzing the moderation effects using the traditional Ordinary Least Squares (OLS) is
quite tedious and sometimes can be misleading. However, AMOS could handle this job quite
easily. The researcher needs to draw the AMOS graphic as shown in Figure 17 and Figure 18,
execute the software, analyze the output and interpret the results. Let assume that variable T is
teaching method, variable M is family background of children, and variable P is their academic
performance. The schematic diagram is given in Figure 16:

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Figure 1615: The model showing the independent, dependent and moderating variable

The AMOS Graphic model representing the schematic diagram in Figure 16 is presented
in Figure 17 and Figure 18.

Modeling the moderator in the model of observed variables:

First of all, the study needs to prove the regression effect of variable T on variable P is
significant. Refer to Figure 17.

Figure 17: Modeling the effect of variable T on variable P in AMOS Graphic

In analyzing the effect of moderator variable B in the observed model, the researcher needs to
compute the interaction effect between independent variable T and moderator variable M. The

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product of T multiply M is termed as TM. Now the model will estimate the effect of T, the effect
of M, and the interaction effect between T and M, termed TM as shown in Figure 18.

Figure 18: Modeling the effects of moderating variable M using AMOS Graphic
In order to prove that the child’s family background (M) is a significant moderator in the
relationship between teaching method (T) and child’s academic performance (P), the study needs
to prove the hypothesis of causal effects as follows:
1) The effect of T on P is reduced when moderator variable M enters the model.
2) At the same time, the effect of interaction TM on P is statistically significant.

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Modeling the moderator in the model of latent constructs:

Modeling the moderator in the model consisting latent constructs is not as easy as
modeling it in the observed variables. First of all, the researcher needs to determine the path
where the moderator effect is to be analyzed. In the first place, the effect of exogenous construct
on the endogenous construct in that particular path must be significant. The modeling of
moderator for latent constructs is shown in Figure 19.

Figure 19: Modeling the moderator M in a model consisting of latent constructs.

Analyzing the moderator in the latent constructs model is not as straight forward as in the
observed model. The method used in the analysis is called the Multi-Group CFA. The
procedure for analyzing a moderator for latent constructs is explained in chapter 7.

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1. Abdullahi, M. S., Awang, Z., Abubakar, A., Umar, K., Umar, M. B., Khalid, S. S., & Abubakar, L. S. The
Influence of Training on Business Success in Nigeria: Case of Registered Small and Medium Scale
Enterprises (SMEs) in Kano State, Nigeria.
2. Abdullahi, M. S., Ghazali, P. L., Awang, Z., Mohd Tahir, I., Ali, M., & Salim, N. A. (2015). The Effect of
Finance, Infrastructure and Training on the Performance of Small and Medium Scale Enterprises (SMEs)
in Nigeria. International Journal of Business and Technopreneurship, 5(3), 421-452.
3. Afthanorhan, A., Ahmad, N., & Sabri, A. (2015). A parametric approach using z-test for comparing 2
means to multi-group analysis in partial least square structural equation modeling (PLS-SEM). British
Journal of Applied Science & Technology, 6(2), 194.
4. Afthanorhan, A., Ahmad, S., & Safee, S. (2014). Moderated mediation using covariance-based structural
equation modeling with amos graphic: volunteerism program. Advances In Natural And Applied
Sciences, 8(8), 108-116.
5. Afthanorhan, A., Aimran, A. N., & Ahmad, S. (2015). Permutation Test, Non-parametric, and Confidence
Set Approaches to Multi Group Analysis for Comparing 2 Groups Using Partial Least Square Structural
Equation Modeling (Pls-Sem). International Journal of Mathematics and Statistics Studies, 3(4), 18-34.
6. Afthanorhan, A., Awang, Z., & Fazella, S. (2017). Developing the patients' loyalty model for medical
tourism industry: the case of Malaysia. International Journal of Society Systems Science, 9(2), 139-164.
7. Afthanorhan, A., Awang, Z., & Fazella, S. (2017). Perception of Tourism Impact and Support Tourism
Development in Terengganu, Malaysia. Social Sciences, 6(3), 106.
8. Afthanorhan, A., Awang, Z., & Mamat, M. (2016). A comparative study between GSCA-SEM and PLS-
SEM. MJ Journal on Statistics and Probability, 1(1), 63-72.
9. Afthanorhan, A., Nazim, A., & Ahmad, S. (2014). A parametric approach to partial least square structural
equation modeling of multigroup analysis (PLS-MGA). International Journal of Economic, Commerce, and
Management, 2(10), 15.
10. Afthanorhan, W. M. A. B. W. (2013). A comparison of partial least square structural equation modeling
(PLS-SEM) and covariance based structural equation modeling (CB-SEM) for confirmatory factor
analysis. International Journal of Engineering Science and Innovative Technology, 2(5), 198-205.
11. Afthanorhan, W. M. A. B. W. (2014). Hierarchical component using reflective-formative measurement
model in partial least square structural equation modeling (Pls-Sem). International Journal of
Mathematics, 2(2), 33-49.
12. Afthanorhan, W. M. A. B. W., & Ahmad, S. (2013). Modelling a high reliability and validity by using
confirmatory factor analysis on five latent construct: Volunteerism program. International Research
Journal Advanced Engineer and Scientific Technology (IRJAEST), 1(1), 7.
13. Afthanorhan, W. M. A. B. W., & Ahmad, S. (2013). Modelling The Multigroup Moderator-Mediator On
Motivation Among Youth In Higher Education Institution Towards Volunteerism Program. International
Journal of Scientific & Engineering Research (IJSER), 4(7), 5.
14. Afthanorhan, W. M. A. B. W., & Ahmad, S. (2013). Modelling the multimediator on motivation among
youth in higher education institution towards volunteerism program. Mathematical Theory and
Modeling, 3(7), 64-70.
15. Afthanorhan, W. M. A. B. W., & Ahmad, S. (2014). Path analysis in covariance-based structural equation
modeling with Amos 18.0. European Journal of Business and Social Sciences, 2(10).
16. Afthanorhan, W. M. A. B. W., Ahmad, S., & Mamat, I. (2014). Pooled Confirmatory Factor Analysis
(PCFA) using structural equation modeling on volunteerism program: A step by step
approach. International Journal of Asian Social Science, 4(5), 642-653.
17. Afthanorhan, W. M. A. W. (2014). Modeling The Multiple Indirect Effect Among Latent Constructs By
Using Structural Equation Modeling: Volunteerism Program. International Journal of Advances in Applied
Sciences, 3(1), 25-32.

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 A Handbook on SEM
Zainudin Awang - Universiti Sultan Zainal Abidin

18. Ahmad, S., & Afthanorhan, W. M. A. B. W. (2014). The importance-performance matrix analysis in partial
least square structural equation modeling (PLS-SEM) with smartpls 2.0 M3. International Journal of
Mathematics Research, 3(1), 1.
19. Ahmad, S., Safee, S., & Afthanorhan, W. M. A. W. (2014). Learning styles towards mathematics
achievements among higher education students. Global Journal of Mathematical Analysis, 2(2), 50-57.
20. Aimran, A. N., Afthanorhan, W. M. A. W., & Razali, N. H. M. (2015). Moderated Mediation Using Partial
Least Square Structural Equation Modeling (PLS-SEM).
21. Aimran, A. N., Ahmad, S., & Afthanorhan, A. (2016). Confirming the Mediation Effect of A Structural
Model By Using Bootstrap Approach: A Case Study of Malaysian 8th Grade Students’ Mathematics
Achievement. International Journal of Business, Economics and Management, 3(4), 44-51.
22. Aimran, A. N., Ahmad, S., Afthanorhan, A., & Awang, Z. (2017, August). The development of comparative
bias index. In AIP Conference Proceedings (Vol. 1870, No. 1, p. 060008). AIP Publishing.
23. Aimran, A. N., Ahmad, S., Afthanorhan, A., & Awang, Z. (2017, May). The assessment of the
performance of covariance-based structural equation modeling and partial least square path modeling.
In AIP Conference Proceedings (Vol. 1842, No. 1, p. 030001). AIP Publishing.
24. Asri, M. A. M., Ahmad, S., & Afthanorhan, A. (2015). Algorithmic Modelling of Boosted Regression Trees’
on Environment’s Big Data. Statistics.
25. Asyraf, W. M. (2014). Improving Energy Conservation using six sigma methodology at faculty of computer
and mathematical sciences (FSKM), universiti teknologi mara (UiTM), SHAH ALAM. Asian Journal of
Economic Modelling, 2(1), 52-68.
26. Awang, Z. (2007). The influence of service quality and corporate image on students' loyalty in higher
education (Doctoral dissertation, Fakulti Pengurusan Ekonomi).
27. Awang, Z. (2010). Analyzing the Effects of Corporate Reputation on the Competitiveness of
Telecommunication Industry using the Structural Equation Modelling: The Case of Kelantan.
In Proceedings of the Regional Conference on Statistical Sciences, Malaysia Institute of Statistics,
Faculty of Computer and Mathematical Sciences, University Technology, MARA (UTM), Malaysia (pp.
283-396).
28. Awang, Z. (2010). The Importance of corporate image in the marketing of university postgraduate
programs. Asian Journal of University Education, 6(1), 13-28.
29. Awang, Z. (2012). Research methodology and data analysis. Penerbit Universiti Teknologi MARA Press.
30. Awang, Z. (2015). SEM made simple: A gentle approach to learning Structural Equation Modeling. MPWS
Rich Publication.
31. Awang, Z. H. (2010). Research Methodology for Business and Social Science. Pusat Penerbitan
Universiti, Universiti Teknologi MARA.
32. Awang, Z. H., & Jusoff, K. (2009). The effects of corporate reputation on the competitiveness of
Malaysian telecommunication service providers. International Journal of Business and Management, 4(5),
173.
33. Awang, Z., Afthanorhan, A., & Mamat, M. (2016). The Likert scale analysis using parametric based
Structural Equation Modeling (SEM). Computational Methods in Social Sciences, 4(1), 13.
34. Awang, Z., Afthanorhan, A., Mohamad, M., & Asri, M. A. M. (2015). An evaluation of measurement model
for medical tourism research: the confirmatory factor analysis approach. International Journal of Tourism
Policy, 6(1), 29-45.
35. Awang, Z., Afthanorhan, W. M. A. W., & Asri, M. A. M. (2015). Parametric and non parametric approach
in structural equation modeling (SEM): The application of bootstrapping. Modern Applied Science, 9(9),
58.
36. Awang, Z., Ahmad, J. H., & Zin, N. M. (2010). Modelling job satisfaction and work commitment among
lecturers: A case of UiTM Kelantan. Journal of Statistical Modeling and Analytics, 1(2), 45-59.

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 A Handbook on SEM
Zainudin Awang - Universiti Sultan Zainal Abidin

37. Awang, Z., Che Mat, M. A., & Asat, S. H. (2005). The Myth and Reality of Service Quality: The Gaps
Analysis.
38. Awang, Z., Mamat, W., Fauzi, W., & Yusof, Z. (2006). Service quality performance students' satisfaction
and students' loyalty in university education/Prof Madya Zainudin Hj Awang, Wan Fauzi Wan Mamat,
Zulkharnain Yusof.
39. Aziz, M. I., Afthanorhan, A., & Awang, Z. (2016). Talent development model for a career in Islamic
banking institutions: A SEM approach. Cogent Business & Management, 3(1), 1186259.
40. Bakar, A. A., & Afthanorhan, A. (2016). Confirmatory Factor Analysis on Family Communication Patterns
Measurement. Procedia-Social and Behavioral Sciences, 219, 33-40.
41. Bakar, A. A., Samsudin, Z., & Afthanorhan, A. (2016). Re-examining Family Communication Pattern: The
Confirmatory Factor Analysis. Journal of Business and Social Review in Emerging Economies, 2(2), 101-
108.
42. Ibrahim, M. D., Salleh, F., & Awang, Z. (2011). The Effects of Financial Factors on Takaful Demand in
Malaysia Journal of.
43. Ibrahim, Y., Awang, Z., & Yusof, Y. (2016). Environmental management practices in the tourism industry
in Malaysia. Man In India, 96(12), 5241-5252.
44. Kashif, M., Awang, Z., Walsh, J., & Altaf, U. (2015). I’m loving it but hating US: understanding consumer
emotions and perceived service quality of US fast food brands. British Food Journal, 117(9), 2344-2360.
45. Kashif, M., Kashif, M., Braganca, E., Braganca, E., Awang, Z., Awang, Z., ... & Cyril De Run, E. (2017).
You abuse but I will stay: The combined effects of job stress, customer abuse, and emotional intelligence
on employee turnover. Journal of Management Development, 36(7), 899-914.
46. Kashif, M., Samsi, S. Z. M., Awang, Z., & Mohamad, M. (2016). EXQ: measurement of healthcare
experience quality in Malaysian settings: A contextualist perspective. International Journal of
Pharmaceutical and Healthcare Marketing, 10(1), 27-47.
47. Latif, S. A., Bidin, Y. H., & Awang, Z. (2013). Towards the Realization of Green Cities: The moderating
role of the residents’ education level. Procedia-Social and Behavioral Sciences, 85, 646-652.
48. Latif, S. A., Omar, M. S., Bidin, Y. H., & Awang, Z. (2012). Environmental problems and quality of life:
situational factor as a predictor of recycling behaviour. Procedia-Social and Behavioral Sciences, 35, 682-
688.
49. Latif, S. A., Omar, M. S., Bidin, Y. H., & Awang, Z. (2012). Environmental values as a predictor of
recycling behaviour in urban areas: A comparative study. Procedia-Social and Behavioral Sciences, 50,
989-996.
50. Latif, S. A., Omar, M. S., Bidin, Y. H., & Awang, Z. (2013). Analyzing the effect of situational factor on
recycling behaviour in determining the quality of life. Journal of Asian Behavioural Studies, 3(8).
51. Latif, S. A., Omar, M. S., Bidin, Y. H., & Awang, Z. (2013). Role of environmental knowledge in creating
pro-environmental residents. Procedia-Social and Behavioral Sciences, 105, 866-874.
52. Lau, T. K., Phang, Y. N., & Awang, Z. (2009). Statistics for UiTM. Oxford Fajar.
53. Mohamad, M., & Awang, Z. (2009). Building corporate image and securing student loyalty in the
Malaysian higher learning industry. The Journal of International Management Studies, 4(1), 30-40.
54. Mohamad, M., Mohammad, M., Mat Ali, N. A., & Awang, Z. (2016). The impact of life satisfaction on
substance abuse: delinquency as a mediator. International Journal of Adolescence and Youth, 1-11.
55. Nazim, A., & Afthanorhan, A. (2014). A comparison between single exponential smoothing (SES), double
exponential smoothing (DES), holt’s (brown) and adaptive response rate exponential smoothing (ARRES)
techniques in forecasting Malaysia population. Global Journal of Mathematical Analysis, 2(4), 276-280.
56. Noor, N. M., Aziz, A. A., Mostapa, M. R., & Awang, Z. (2015). Validation of the Malay version of the
Inventory of Functional Status after Childbirth questionnaire. BioMed research international, 2015.

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 A Handbook on SEM
Zainudin Awang - Universiti Sultan Zainal Abidin

57. Raston, N. A., Awang, Z., & Hamzah, N. H. (2010). The effects of Information Communication Technology
(ICT) policy on security compliance among department of Irrigation and Drainage (DID) staff in
Kelantan. Journal of Statistical Modeling and Analytics Vol, 1(28-44).
58. Seman, Z., Awang, Z., Jaafar, Z., Nor, N. M., & Ramli, W. K. H. W. (2010). Modelling Production Capacity
of Cheap Efficient Nursery Tank System (CENTS) using Farm Management and Technical Efficiency: A
case of Terengganu.
59. Yusof, Y., Awang, Z., Jusoff, K., & Ibrahim, Y. (2017). The influence of green practices by non-green
hotels on customer satisfaction and loyalty in hotel and tourism industry. International Journal of Green
Economics, 11(1), 1-14.
60. Zainudin, A. (2012). A handbook on SEM: Structural equation modelling using amos graphics.
61. Zainudin, A. (2012). Research Methodology and Data Analysis 5th Edition. Shah Alam: Universiti
Teknologi MARA Publication Centre.
62. Zainudin, A. (2012). Structural equation modeling using AMOS graphic. Shah Alam: Universiti Teknologi
MARA Publication Centre (UPENA).

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