MODERATED MEDIATION BETWEEN LEADERSHIP STYLE AND ORGANIZATIONAL PERFORMANCE: THE ROLE OF CORPORATE GOVERNANCE
Abstract
The role of leader is vital for the survival and progress of an organization. Leadership helps in developing the organization’s objectives, values and vision. Leaders involve influencing personnel to persuade them achieve the organizational objectives. Top quality leadership is essential to achieve the mission and vision along with coping with the changes occurring in the external environment. Leadership style equally plays an important role in shaping the behaviour and attitude of the members of an organization. In recent years, the study of leadership has drawn more attention due to its role in the failure or success of an organization. In current time, many companies are facing problems related to unethical practices, high labor turnover, poor financial performance, etc. This may be due to the lack of effective leadership. Corporate governance is also increasingly becoming important in organization as an approach of improving performance. Due to widespread corporate scandals and failures around the world, there has been a renewed interest in the effect of corporate governance on firm performance. Some studies have argued for a positive relationship while others argued that there is a negative relationship between corporate governance and organizational performance. The main aim of many companies is to accomplish its stated objectives; hence, there is a need of effective leaders for coordinating and motivating the employees. Over the years, scholars and researchers have not been unanimous on the most appropriate style of leadership in organization and these has led to the formulation of several theories that could bring about organizational efficiency and effectiveness. Still yet, some organizations do not take account of the leadership style adopted by their managers. It is against this backdrop that this paper sought to fill the knowledge gap by establishing the relationship between leadership style, corporate governance and organizational performance. The study results indicated a significant positive relationship between board composition, board diversity as well as directors’ compensation and financial performance measured as Return on Assets (ROA) and Return on Equity (ROE). The findings on integrated model, which incorporated the moderating effect of board diversity and directors’ compensation individually and jointly, suggest that the presence of board diversity (women) and directors’ compensation individually had significant positive influence on the relationship between board composition and financial performance when measured as ROE. The findings had practical implications on the users of financial statements such as regulatory bodies, management of the companies, financial analysts, investors and researchers. The study recommended that organizations should ensure that they adopt corporate governance practices to enhance the organizational performance such as, board composition, board size, independence of chief executive officer (CEO), audit committee, transparency and accountability, Shareholders communication policy and continuous disclosure. The study also recommended that organizations should strive towards strategizing effective ways of incorporating CG issues into their leadership style thereby enhancing the integrity of the firm to the public and ultimately improving financial performance.
Keywords: Leadership style, Corporate Governance, Organizational Performance, Board Diversity.
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Ibrahim, M. (2020). The Moderating Effect of Corporate Governance on The Relationship Between Corporate Social Responsibility and Financial Performance of Listed Non-Financial Services Companies in Nigeria, International Journal of Accounting & Finance (IJAF), 9 (1).
Igbaekemen, G. O., & Odivwri, J. E. (2015). Impact of leadership style on organization performance: A critical literature review. Arabian Journal of Business and Management Review, 5(5), 1-7.
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Joe Duke, I. I., & Kankpang, K. A. (2011). Linking corporate governance with organizational performance: New insights and evidence from Nigeria. Global Journal of Management and Business Research, 11(12).
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Kabir, R., & Thai, H. M. (2017). Does corporate governance shape the relationship between corporate social responsibility and financial performance? Pacific Accounting Review, 29 (2), 227–258.
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Kordloie, H. R., & Shahverdi, M. (2018). Investigating the Relationships between Social Responsibility and Financial Performance with Respect to Good Corporate Governance (Tehran Stock Exchange). Astra Salvensis, 1(1), 159-174
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Published
2021-06-10
How to Cite
Owuori, P. J. (2021). MODERATED MEDIATION BETWEEN LEADERSHIP STYLE AND ORGANIZATIONAL PERFORMANCE: THE ROLE OF CORPORATE GOVERNANCE. African Journal of Emerging Issues, 3(3), 64 - 82. Retrieved from https://ajoeijournals.org/sys/index.php/ajoei/article/view/182
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