The Influence of Leadership Styles on Employee Performance: Transformational, Transactional and Ethical Leadership

Abstract

Employee performance in the organizational realm is indispensable for the perpetual sustainability of an entity. Performance deterioration is inclined to leadership styles embraced by leaders in the organization. The dilemma is still depicted with the absence of a conclusive statement regarding which leadership philosophies are essential for raising the performance and quality of the organization. When linking to this theoretical gap, this study investigates the impact of transformational, transactional, and ethical leadership on employee performance in the banking sector of Nepal. This research proposes and empirically examines three hypotheses, namely, a positive and significant relationship between transformational leadership and employee performance, a positive and significant relationship between transactional leadership and employee performance, and a positive and significant relationship between ethical leadership and employee performance. These hypotheses were examined in reference to the employees working in commercial and development banks in Kathmandu, Nepal. Convenience sampling-based data was collected for the study to test hypotheses. A total of 160 questionnaires were distributed to the targeted respondents, who were bank employees. 140 questionnaires were received useful for the study, representing 87.50 percent of respondents who voluntarily participated in the survey. Leadership styles and employee performance were measured using Likert scale items. Internal consistency and reliability were tested with Cronbach’s alpha. The Cronbach’s alpha for transformational leadership is 0.841, transactional leadership is 0.616, ethical leadership is 0.795, and Cronbach’s alpha for employee performance is 0.869. The study employed a descriptive and causal-relational research approach. The analysis of data was based on the use of statistical software SPSS and STATA packages. The statistical methods and tests employed in the study were descriptive statistics: frequency and percentage for demographic data, correlation and regression analysis were adopted for testing hypotheses. The analysis results depicted a positive and significant effect on transformational and transactional leadership concerning employee performance. Ethical leadership has a positive impact on employee performance but is found insignificant. Moreover, the findings of the study support research from others depicting that leadership styles affect the employee performance.