The Influence of Leadership Styles on Perception of Financial Performance: A 360-degree Feedback Case Study in Finnish Grocery Retail Business

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School of Business | Master's thesis
Degree programme
Management and International Business (MIB)
59 + 3
Leadership is a widely researched phenomenon within the organizational studies, which describes the persuasion of other people to pursue a common goal that represents something important for the welfare of a group. Leadership has been studied from many viewpoints, e.g. which attributes predict certain types of leadership, how to accurately measure leadership, which kinds of breakdowns concerning leadership styles can be justified and to which outcomes do they ultimately lead to. Different organizational phenomena have been shown to share impact with leadership styles on researched outcomes which makes the differentiation of individual effects of leadership challenging. Although leadership outcomes are extensively studied, research exploring its effects on perceived and actual financial performance are scarce. As financial performance represents a quintessential part of business, the relationship between different leadership styles and the perception of financial performance should be further explored. This thesis’ objective is to research the effect of three different leadership styles (transformational leadership, transactional leadership, laissez-faire) on the subjective perception of firm financial performance. To target this objective, quantitative approach was used. A sample of 92 organizational members working in a leading grocery retail company in Finland was studied. The data were collected with a web-based 360-degree feedback survey at two consecutive points of time with a time lag of one year. Exploratory factor analysis (EFA), confirmatory factor analysis (CFA), and hierarchical and separate linear regression were utilized in the analysis of the data. The results indicated that transformational and transactional leadership are positively and significantly associated with the perception of positive financial performance, whereas laissez-faire showed no significant relationship with the perception of financial performance. The research findings imply that interpretations about the positive effects of transformational and transactional leadership on perceived financial outcomes can be made, and thus that embracing these leadership styles positively affects the perception of a firm’s high financial performance. Certainly, the findings of this study encourage further exploration of the relationship between especially transformational and transactional but also laissez-faire leadership and business outcomes, as the ability to show a significant positive relationship between a leadership style and perception of financial performance has several managerial implications, such as indicating a suitable leadership behavior to predict high financial performance or developing customized leadership training programs.
Thesis advisor
Herold, Kristiina
leadership, financial performance, antecedents of financial performance, transformational leadership, transactional leadership, laissez-faire, 360-degree feedback
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