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Journal Article

Negative Denominators in Index Variables: The Vulnerability of Return on Equity, Debt to Equity, and Other Ratios  pp1-10

David B. Thornblad, Hanko K. Zeitzmann, Kevin D. Carlson

© Mar 2018 Volume 16 Issue 1, Editor: Ann Brown, pp1 - 54

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Abstract

This paper highlights construct validity issues that can occur when researchers utilize index variables (commonly referred to as ratios) in which the denominator can become negative. These indexes are commonly used in management research, and we demonstrate that indexes constructed from data which includes negative values for the denominator lose their ordinal properties and can be difficult, if not impossible, to interpret. Further, we show that common empirical practices to resolve these issues do not solve issues of ordinality and interpretability and may lead to additional validity issues. We recommend the use of alternate measures not affected by the issues described in this article to increase the validity of future organizational research.

 

Keywords: Indexes, methodological issues, negative denominators, ratios, research methodology.

 

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Journal Issue

Volume 16 Issue 1 / Mar 2018  pp1‑54

Editor: Ann Brown

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Editorial

 

Keywords: Indexes, methodological issues, negative denominators, ratios, research methodology, Case-Study Method, Key Informants, Different Voices, Cumulative Cultural Text, Representation Theory, Interviewee Reviews, and Constructed Public Understanding, Survey, behaviour, response rate, procurement, suppliers

 

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