Corporate Financial Performance: Development of a Formative Construct for IS Research

• In Event: Managing and Evaluating AIS Research

Abstract

This paper identifies and addresses a common problem in information technology (IT) business valuation studies: the disparity of measures used to represent corporate financial performance (CFP). The paper reveals a lack of content validity in CFP measures as used in IS research. To address this problem, we used a sample of 122,714 annual performance records from 2000 through 2010 to reduce a pool of 74 CFP measures to a formative construct comprised of 20 surrogates. We validate this CFP formative construct using structural equation modeling and retest it using ordinary least squares (OLS). The formative CFP construct has far greater content validity, construct validity, and reliability than the CFP measures previously used in IS research on IT business value.

Authors

• Gary Templeton, Mississippi State University

• Laurie Burney, Baylor University

• Marcia Weidenmier Watson, Mississippi State University