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Do online students make the grade on the business major field ETS exam?


Assessment is an explicit obligation of modern academic programs. The Educational Testing Service's (ETS) exam in business is an external standardized measure of assessment widely used to assess undergraduate business programs. Standardized exams like the ETS business exam offer a convenient tool for benchmarking student general knowledge compared to students at other schools. Evidence supporting the correlation between ETS scores and a student's actual business knowledge is limited but is widely employed as a tool for analysis. The purpose of this paper is to evaluate the determinants of student performance on the ETS major field achievement exam with a focus on students taking multiple business courses in the online environment. There is little or no literature examining the impact of online courses on student performance on the ETS exam despite the fact that online and hybrid instruction have become ubiquitous throughout many college campuses during the last decade. The results of this study are derived at a public university located in the Southwestern part of the United States. The institution is mid-sized with a total enrollment of approximately 7,500 total students, 1,000 undergraduate business students, and 350 graduate business students.

The organization of the manuscript is as follows: First, a brief literature review is put forth. The second section of the manuscript describes the data and model. The next section offers empirical results for the determinants of performance on the ETS exam. The final section offers conclusions and implications.


A vast amount of research exists on the determinants of student performance on the ETS exam. Mirchandani, Lynch, and Hamilton (2001) find that two types of variables are related to student performance on the ETS exam: input variables (SAT scores, transfer GPA, and gender) and process variables (grades in quantitative courses). They conclude that the SAT score is a dominant variable explaining most of the variation in ETS exam scores, although other variables including GPA and gender are also statistically significant. Black and Duhon (2003) employ a large sample of 297 students to determine student performance on the ETS exam. Their regression model reveals that GPA, ACT score, gender, and major are significant determinants of performance on the ETS exam. Bagamery, Lasik, and Nixon (2005) find gender, whether students took the SAT, and grades to be significant determinants of the ETS exam, while location, age, transfer status, and major are not significant. Bycio and Allen (2007) contribute to the literature by showing that, in addition to GPA and SAT scores, student motivation is an important determinant of performance on the ETS exam. Terry, Mills, and Sollosy (2008) find that student motivation to perform at a high-level on the ETS exam is significantly influenced by including the exam score as ten or twenty percent of the final grade in a business capstone course.

Course formats in business schools today are driven by both student demand and the desire of schools to use resources in efficient ways. Attracting students from broader areas is one of the reasons for the expansion of online course delivery. The nature of course format could impact ETS scores if one instruction mode is inherently inferior to another. Three frequently used course formats include the traditional campus courses, online courses, and newer hybrid courses. Hybrid courses are taught using a mode of instruction that combines some of the inherent features of online (e.g., time independence) and campus (e.g., personal interaction) environments (Terry, 2007).

Online course offerings in postsecondary schools are growing rapidly. Postsecondary institutions offering online courses include both traditional institutions and institutions founded to offer only online courses. An example of a postsecondary institution founded to offer only online courses is Capella University. Founded in 1993, Capella currently has over 19,900 adult learners enrolled in online courses. According to the U.S. Department of Education, 90 percent of degree-granting postsecondary institutions offered asynchronous Internet courses in 2001 (National Center for Education Statistics, 2001). Both the numbers of postsecondary schools offering online courses and the numbers of students enrolling in online courses are increasing. Jeff Seaman (2007), chief information officer and survey director of the Sloan Consortium states, "There were nearly 3.2 million students taking at least one course online this past fall, up from 2.3 million just last year." According to Online Nation: Five Years of Growth in Online Learning (Allen & Seaman, 2007) the growth rate of 9.7 percent for online enrollments far exceeds the growth rate of 1.5 percent for the overall higher education student population. (Allen & Seaman, 2007) Brown and Corkill (2007) indicate that almost two-thirds of colleges and universities that offer face-to-face courses also are providing graduate courses via the online environment.

As the numbers of students enrolled in online instruction have increased, researchers have debated the effectiveness of online instruction (Bowman, 2003; Fann & Lewis, 2001; Fortune, Shifflett & Sibley, 2006; Gayton & McEwen, 2007; Jennings & Bayless, 2003; Lezberg, 1998; Marks, Sibley & Arbaugh, 2005; Okula, 1999; Robles & Braathen, 2002; Terry, 2000; Worley & Dyrud, 2003). Interest in the effectiveness of online instruction as a component of overall program effectiveness has been driven by the federal government through requirements of regional accrediting agencies, an international accreditation association for schools of business, universities where schools of Business are housed and varied individual stakeholders. As individual college CEOs examine the role of online learning in meeting a college's strategic needs, assurance of its effectiveness in the creation of genuine learning is a critical factor to be considered (Ebersole, 2008). While the need for assessment is not new, the focus of assessment as illustrated by the Association to Advance Collegiate Schools of Business (AACSB) International has clearly intensified (Pringle & Michel, 2007).

All collegiate business programs are tasked with the ongoing need for assessment (Bagamery, Lasik & Nixon, 2005; Martell & Calderon, 2005; Trapnell, 2005). It is important that assessment for online education be viewed as a system that involves more than just testing and evaluation of students (Robles & Braathen, 2002). Traditionally, accrediting bodies were focusing primarily on input measures (Peach, Mukherjee & Hornyak, 2007). Input measures could reflect characteristics of the students who attended the business program (Mirchandani, Lynch & Hamilton, 2001) or organizational factors such as the institution's reputation, faculty-student ratio, or number of faculty with terminal degrees (Peach, Mukherjee & Hornyak, 2007). For collegiate business programs aspiring to meet or maintain the standards of accreditation established by AACSB, this requires the schools of Business have program learning goals and utilize direct measures that reflect student demonstration of achievement of these goals (Martell, 2007; Pringle & Michel, 2007). As schools of business have developed and rapidly expanded their online course enrollments, assuring that student learning in the online format is at least equivalent to the level of learning taking place in traditional classroom courses could be a useful component of meeting assessment requirements.


The purpose of this section is to develop an empirical model that can test student performance on the ETS exam. Davisson and Bonello (1976) propose an empirical research taxonomy in which they specify the categories of inputs for the production function of learning. These categories are human capital (admission exam score, GPA, discipline major), utilization rate (study time), and technology (lectures, classroom demonstrations). Using this taxonomy, Becker (1983) demonstrates that a simple production function can be generated which may be reduced to an estimable equation. While his model is somewhat simplistic, it has the advantage of being both parsimonious and testable. A number of problems may arise from this research approach (Chizmar & Spencer, 1980; Becker, 1983). Among these are errors in measurement and multicollinearity associated with demographic data. Despite these potential problems, there must be some starting point for empirical research into the process by which business knowledge is learned.

The choice as to what demographic variables to include in the model presents several difficulties. A parsimonious model is specified in order to avoid potential multicollinearity problems. While other authors have found a significant relationship between race or age and learning (Siegfried & Fels, 1979; Hirschfeld, Moore, & Brown, 1995), the terms are not significant in this study. A number of specifications are considered using race, age, work experience, and concurrent hours in various combinations. Inclusion of these variables into the model affected the standard errors of the coefficients but not the value of the remaining coefficients. For this reason they are not included in the model. University academic records are the source of admission and demographic information because of the potential biases identified in self-reported data (Maxwell & Lopus, 1994).

The model developed to analyze student learning relies on a production view of student learning. Assume that the production function of learning business concepts via the ETS exam can be represented by a production function of the form:

(1) [Y.sub.i] = f([A.sub.i], [E.sub.i], [D.sub.i], [X.sub.i]),

where Y measures the degree to which a student learns, A is information about the student's native ability, E is information about the student's effort, D is a [0, 1] dummy variable indicating demonstration method or mode, and X is a vector of demographic information. As noted above, this can be reduced to an estimable equation. The specific model used in this study is presented as follows:

(2) [SCORE.sub.i] = [B.sub.0] + [B.sub.1][ABILITY.sub.i] + [B.sub.2][GPA.sub.i] + [B.sub.3][NET.sub.i] + [B.sub.4][TRANSFER.sub.i] + [B.,sub.5][FOREIGN.sub.i] + [B.sub.6][GENDER.sub.i] + [B.sub.7][GR10.sub.i] + [B.sub.8][GR20.sub.i] + [u.sub.i].

The dependent variable used in measuring effectiveness of student performance is percentile score (SCORE) on the ETS exam. Descriptive statistics of all variables employed in the model are presented in Table 1. The ETS exam is administered to senior business students in the research cohort enrolled in the undergraduate capstone strategic management course. The mean percentile score for the research cohort is the 48.49 percentile with a standard deviation of 28.07. The ETS score at a mean of approximately the 50th percentile combined with a large standard deviation of both very good and relatively poor student performances yields a research cohort that is very representative of a typical regional business program.

The student's academic ability (ABILITY) is based on the ACT entrance exam or SAT converted to ACT equivalency. The average ACT score for the research cohort is 21.04 (equivalent to 1020 on the math/reading SAT or 1550 on the 2400-point SAT). The ABILITY variable via the ACT exam is used as a proxy of student innate ability before entering the university. Student ability as measured by the ACT exam is expected to have a positive impact on ETS score.

Grade point average (GPA) is included in model based on previous research indicating that grade point average is one of the primary positive determinants of student performance on the ETS exam. Student grade point average in the study for the cohort is 2.96 with a standard deviation of approximately half a grade at 0.49.

Student enrollment in more than one online business course during the academic program before taking the ETS exam is noted by the categorical variables NET. The business program in the research study does not offer a complete undergraduate business degree online but does offer ad hoc courses via the online instruction mode. Forty-three percent of the students in the research cohort completed multiple business courses via online instruction. The NET variable is expected to have a negative impact on ETS scores given the online environment is still developing as an instructional mode relative to the traditional chalk and talk of the classroom.

The variable TRANSFER is included in the model as a demographic variable controlling for students that completed at least twenty-five percent of their undergraduate education at an another institution. Over forty-five percent of the students in the research cohort are classified as transfer students with the majority transferring from a junior college. The transfer variable is expected to have a negative impact on ETS score as business core classes in economics, accounting, and business law at a junior college are not expected to meet the rigor of the courses at a university.

The demographic variable FOREIGN is included in the study to separate international students from domestic students. International students are often recruited to diversify the campus environment and raise the level of academic standards via performance on standardized entrance examinations like the ACT or SAT. International students often face unique language, psychic, and cultural challenges that might negate some of their innate ability and work ethic. Eight percent of the research cohort is classified as a foreign student.

The variable GENDER is included in the model based on the finding of previous researchers (Bagamery, Lasik & Nixon, 2005; Black and Duhon, 2003; Mirchandani, Lynch & Hamilton, 2001) that male student performance on the ETS exam is higher than female. The research cohort for this study is evenly divided between males and females.

The model includes the two student motivation variables, GR10 and GR20, where GR10 represents the case where percentage score on the ETS exam counts ten percent of the course grade in the business capstone course and GR20 applies percentage score on the ETS exam to twenty percent of the capstone course grade. The effort to tie student performance on the ETS grade as a motivator is consistent with Allen and Bycio (1997), but adds the wrinkle of comparing multiple levels of grading application at both the ten and twenty percent levels. Bycio and Allen (2007) provide nominal evidence that student motivation is an important determinant of performance on the ETS exam but their measure is based on a 4-point scale employing self-reported data without including a test group versus control group for a course grade application.


Results from the ordinary least squares estimation of equation (2) are presented in this section and Table 2. The sample cohort is derived from students taking the ETS exam from 2003-2007. The total usable sample size is 136, with 84 students eliminated from the global sample of 220 because of incomplete information, usually relating to the lack of ACT/SAT scores (Douglas & Joseph, 1995). None of the independent variables in the model have a correlation higher than .62, providing evidence that the model specification does not suffer from excessive multicollinearity. The equation (2) model explains over 46 percent of the variance in performance on the ETS exam. Four of the eight independent variables in the model are statistically significant.

Two of the statistically significant variables are ABILITY and GPA. The empirical results imply that student score on the ETS exam are directly related to academic ability measured by the ACT college entrance exam and academic performance measured by college grade point average. The statistically significant impact of standardized entrance exam scores and grade point average is consistent with previous research. The significance of the ABILITY variable could simply be based on the observation that students with innate academic ability for standardized exams perform at a relatively high level on the ETS exam. The results relating to the ACT exam are somewhat tempered by the observation that 38% of the students in the initial sample were eliminated primarily for not having an official ACT/SAT score posted with the university. The positive and significant impact of GPA on ETS exam score is anticipated as students with high grades are more likely to learn and retain core business information than students with a relatively low grade point average. Consistent with Mirchandani et al. (2001), overall GPA has a strong internal validity and provides a measure of student performance related to the curriculum of the school.

The most interesting result from the study revolves around the variable NET. Holding constant ability, grades, student motivation, and demographic considerations, students completing multiple business courses via the Internet (NET) format scored six percent lower on the ETS exam but the result is not statistically significant (t-stat of-1.32). The insignificant statistical result implies the online instruction mode produces a learning environment that is fairly equivalent to the traditional campus environment. Recent advances in online instruction tools that make it relatively easy to utilize streaming video, narrated graphic illustrations, and related communication instruments have narrowed the quality gap between the campus and online learning environments. It should be noted that the lowest ETS scores for students in the online mode were observed in the first two years of the data set, providing anecdotal evidence for the hypothesis that recent technological advances have improved the quality of the online learning environment.

The three demographic variables in the model are not statistically significant. The TRANSFER variable yielded a surprisingly positive coefficient but the variable is not statistically significant (t-stat of 0.86). There appears to be little difference in performance on the ETS exam for transfer students versus native students. The demographic variable controlling for foreign student performance is positive, with international students scoring five percentile points higher on the ETS exam than domestic students, but not statistically significant. The statistical insignificance of the FOREIGN variable is consistent with the existing literature. The GENDER coefficient associated with males is negative but highly insignificant. Unlike previous research, the results of this study do not find any evidence of a gender differential with respect to performance on the ETS exam.

The two student motivation variables are both positive and statistically significant. The results provide evidence that students are motivated to study and put forth effort on the ETS exam when scores are applied to the capstone course grade. A ten percent application to capstone course grade results in a 12.91 increase in the ETS percentile score and a twenty percent application to course grade results in an 18.1 percentile score increase. The results clearly indicate a significant student response to the grade motivator but might be somewhat unique to this research cohort based on the middling mean ETS score and large standard deviation. It is a mathematical improbability that a research cohort comprised of students with average ETS scores well above the 50th percentile would have an equivalent result. The positive and significant result is primarily applicable to programs that struggle at or below the 50th percentile on the ETS exam and need to employ a tangible incentive in order to get students to explicitly put forth a significant and serious effort on the ETS exam instead of simply treating it as a required task with little or no direct benefits or penalties (Allen & Bycio, 1997). The results also imply that a ten percent grade incentive is strong enough to motivate students to put forth significant effort, although the twenty percent grade incentive does yield a coefficient that is five percentile points larger. The determination of a ten or twenty percent grade motivator should probably be at the discretion of the course instructor for the capstone course given that both are significant.


This study examines the determinants of student performance on the ETS business exam at a regional university. Consistent with previous research, the results find that academic ability measured by the college entrance exam and student grade point average are the primary determinants of student performance on the ETS exam. The empirical results indicate that counting performance on the ETS in a range of ten to twenty percent as part of the capstone course grade significantly increases performance on the ETS exam. Gender, transfer student status, completing courses online, and international student classification do not appear to have an impact on student ETS exam performance. The statistically insignificant result associated with the completion of multiple business courses in the online instruction mode is particularly interesting as a continuation of the literature examining the effectiveness of online instruction.


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Neil Terry, West Texas A&M University

LaVelle Mills, West Texas A&M University

Duane Rosa, West Texas A&M University

Marc Sollosy, West Texas A&M University
Table 1: Summary Statistics

Variable            Mean      Standard Dev.

SCORE               48.49         28.07
ABILITY             21.04         4.31
GPA                 2.97          0.49
NET                 0.43          0.49
TRANSFER            0.47          0.50
FOREIGN             0.08          0.27
GENDER              0.50          0.50
GR10                0.19          0.39
GR20                0.22          0.42

Table 2: Determinants of ETS Performance

Variable            Coefficient (t-statistic)

Intercept               -87.304 (4.98) *
ABILITY                   3.178 (4.71) *
GPA                      19.320 (3.28) *
NET                      -6.009 (-1.32)
TRANSFER                  4.273 (0.86)
FOREIGN                   4.981 (0.55)
GENDER                   -0.269 (-0.06)
GR10                     12.9111 (2.02) *
GR20                     18.105 (3.17) *
R Square                  0.466
F-Value                  13.85

Notes: * p < .05 and n = 136.
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Author:Terry, Neil; Mills, LaVelle; Rosa, Duane; Sollosy, Marc
Publication:Academy of Educational Leadership Journal
Article Type:Report
Geographic Code:1USA
Date:Dec 1, 2009
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