Financial Systems Theory and Control of Finances: The Mediating Role of Psychological Empowerment in the Relationship between Transformational Leadership and Employee Engagement: An Evidence from Vietnam

Abstract

Employee engagement has been closely linked to work attitudes (e.g., job satisfaction, intentions to quit, withdrawal), employees' innovation, organizational success and financial performance (e.g., profits, shareholder return) and, therefore, getting much attention from academia and practitioner communities. Additionally, to have a full insight in employees, organizations have to take care of psychological side of employees, which manifests in psychological empowerment. This study investigates the mediating role of psychological empowerment in the relationship between transformational leadership and employee engagement in the context of Vietnam. Data were collected through a survey conducted in Vietnam using 254 respondents who are employees and managers. A researcher-administered questionnaire survey method was used for data collection. The findings reveal that Psychological Empowerment is significantly related with Transformational leadership and Employee Engagement; there is a direct effect of Psychological Empowerment and Employee Engagement; and Transformational leadership not only has a direct impact on Employee Engagement, but also has indirect effect through Psychological Empowerment as a mediating variable. These findings have several implications also for human resource practices in organizations. It is expected that this study provides valuable information to consider in business practice for the development of interventions aimed at mitigating turnover behavior and maximizing organizational performances through an engaged workforce.