The impact of leadership on firm financial performance: the mediating role of employees' readiness to change

Abstract

PurposeThe aim of the research is to investigate the influence of leadership on firm financial performance and to explore the mediating role of employees' readiness to change.Design/methodology/approachThe paper hypothesizes that employees' readiness to change mediates the relationship between leadership and firm financial performance. A total of 213 employees of Greek shipping firms completed questionnaires examining their firms' leadership style and concurrently, their supervisors appraised their readiness to change. The research model was tested with the use of Structural Equation Modelling.FindingsThe research findings note the importance of leadership in fostering firm financial performance; they describe how each leadership style influences employees' readiness to change; as well as, they confirm that employee readiness mediates the relationship between leadership and firm financial performance. Theoretical and practical implications of these findings are analysed.Research limitations/implicationsGiven that the research was conducted during the severe Greek economic crisis, a time when employees' behaviour is highly influenced by distinctive and complex internal and external relationships, there is scope for further work to verify that the relationships identified in this study remain valid during periods when market conditions are more favourable.Practical implicationsThe findings provide further support on the significance of employees' readiness to change and the paper suggests policies for its development.Originality/valueThe originality of this study lies in the finding that employees' readiness to change mediates the relationship between leadership and firm financial performance. Further, the study was carried out in Greek shipping industry that plays a vital role in the international shipping industry which is responsible for the carriage of around 90% of world trade.