Transformational leadership and objective performance in banks

This investigation examines the relations between transforma-tional/transactional leadership and performance indicators of 20 diierent banks, using a sample of some 1500 observations. Leadership behavior is measured by the Multifactor Leadership Questionnaire (MLQ), which i s used for the rst time in the German-speaking area. The psychometric quality of the German MLQ is analyzed and found to be inadequate. We therefore derive and cross-validate a modiied four-factor MLQ. This is the rst empirical study that relates leadership behavior to objective performance indicators without any qualitative or subjective innuence. Objective performance measures take i n to account customer features and local market conditions, and show whether reasonable targets are over-or underperformed. Based on LISREL model estimates we nd support for the hypothesis that transformational leadership aects performance over and above transactional leadership. Another new aspect of this study is the distinction between long-term and short-term performance. We nd that core dimensions of transformational leadership are more strongly related to long-term than to short-term performance. Individualized Consideration is positively related to short-term but negatively related to long-term performance. Acknowledgments: We w ould like to thank two anonymous referees and the editor for many helpful comments and suggestions.