IMPACT OF LEADERSHIP STYLE ON BANK PROFITABILITY: CASE STUDY OF A BANK IN
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IMPACT OF LEADERSHIP STYLE ON BANK PROFITABILITY: CASE STUDY OF A BANK IN BOSNIA AND HERZEGOVINA
IMPACT OF LEADERSHIP STYLE ON BANK PROFITABILITY: CASE STUDY OF A BANK IN BOSNIA AND HERZEGOVINA

Author(s): Adisa Delić, Emira Kozarević, Mersiha Alić
Subject(s): Business Economy / Management, Methodology and research technology, Evaluation research, Financial Markets
Published by: Ekonomski fakultet Sveučilišta u Splitu
Keywords: banks; leadership; leadermember exchange (LMX); in-group exchange; out-group exchange;

Summary/Abstract: The goal of this paper is to demonstrate the extent to which the quality of the leader-follower relationship, expressed by the LMX coefficient, affects the bank profitability. Banks characterised by a high level of LMX possess a successful social atmosphere and interpersonal relationships, which is reflected in the emotional support and willingness to share resources, knowledge, and information between employees. Such a relationship between leaders and followers contributes to creating favourable social atmosphere, significantly affecting the overall performance of banks. Empirical research presented in this paper uses the data collected from a business network of a specifically selected Bank. The data was collected via a modified version of the LMX-7 questionnaire, focusing on each branch of a selected bank. Concrete indicators were analyzed (such as net profit margin, ROA, and ROE), which helped establish a link between profitability and the degree of leader-follower communication exchange (measured by LMX coefficient). The results reveal that the applied leadership style directly impacted on the profitability of a selected bank, indicating that this finding could be used as input for management systems of similar financial institutions as well as a catalyst for further research in this field.

  • Issue Year: 22/2017
  • Issue No: 2
  • Page Range: 65-78
  • Page Count: 14
  • Language: English
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