The nexus between green transformational leadership and financial performance of hotels: the mediating effect of environmental management practices

Abstract

PurposeThis study sought to examine the effect of green transformational leadership (GTL) on financial performance (FPef) of star-rated hotels in Addis Ababa and also delving into the mediating effect of environmental management practices (EMPs) on GTL–FPef nexus.Design/methodology/approachThe study used survey data, and analysis was done using SPSS 25, AMOS 24 and PROCESS Macro to determine the mediating effect of EMPs on the GTL–FPef nexus in hotel sector (n = 100).FindingsThe study found that the hotels under investigation have little access to green financing, lack environmental policy and strategy, perceived low stakeholders’ pressure to embrace eco-friendly practices and implemented EMPs to a lesser extent. Regression results demonstrated that GTL had a positive effect on EMPs and FPef. Furthermore, the result of a mediation test conducted using SPSS PROCESS macro revealed that the relationship between GTL and FPef is partially mediated by EMPs. Finally, one-way ANOVA result revealed that luxury hotels adopt EMPs better than budget hotels.Practical implicationsThis study provides valuable practical insights for hotel owners, managers and policy makers regarding the importance of adopting GTL style and investing in EMPs to remain environmentally responsible and ultimately improve FPef levels.Originality/valueUnlike previous studies that focused on individual-level intermediate variables to explain the indirect relationship between GTL and FPef, this study examined the mediating role of EMPs in the relationship between GTL and FPef at organizational level.