Managerial Leadership Style and Employee Commitment: Evidence from the Financial Sector

Abstract

Employees’ poor performance within the banking sector has become evident in recent times, and studies on how leadership styles affect employee commitment in the Ghanaian banking sector is scanty. The purpose of this article is to examine the effect of leadership styles on employee commitment after controlling for demographic and institutional factors. The study also examines whether there is a difference in the leadership style due to the gender of leaders and determines the dominant leadership style among bank managers. A sample of 160 leaders and subordinates were selected from 10 commercial banks. The study employed hierarchical regression as well as independent sample t-test techniques. Financial organizations were chosen because much of the existing studies on leadership styles have focussed on non-financial sectors. The findings of the study indicate that transactional leadership is the most dominant leadership style practised within the banking sector. After controlling for demographic and institutional variables, laissez-faire and transformational leadership behaviours have significant positive effects on employee commitment. Although transactional leadership style is dominant, it contributes only 4.8 per cent to employee commitment as compared to 51 per cent by transformational leadership style in eliciting employee commitment. There is an evidence that, married employees are more likely to be committed employees than the unmarried, but as the employee’s number of children increases, commitment level falls. Although all the three leadership styles have positive effects on employee commitment, transactional and laissez-faire leadership styles are most significant. This is the first study in Ghana to show that there is no significant difference between the sexes when it comes to exhibiting leadership styles in the banking sector. The findings of this study provide useful information for policy-makers to improve employees’ commitment levels and their performance by means of stimulating the right leadership styles in the managers.