THE EFFECT OF LEADERSHIP STYLES ON EMPLOYEES’ PERFORMANCE IN THE FINANCIAL SECTOR: A CASE OF ADDISITUA ETHIOPIA SAVING AND CREDIT CO-OPERATIVE SOCIETY WITH LIABILITY, IN ADDIS ABABA, ETHIOPIA

Abstract

This study aims to investigate the effect of leadership styles on employee performance within the Addisitua Ethiopia Saving and Credit Co-operative Society with Liability. An explanatory research design was employed to determine the effects of the independent variables on the dependent variable. The study utilized a quantitative research approach to test the effects using hypotheses and research questions. Both primary and secondary data sources were utilized, with primary data collected from employees in the financial sector through self-administered close-ended questionnaires. The sampling technique involved a census survey with a total population size of 114 respondents, including managers and employees of the institution. Descriptive and inferential data analysis methods were applied, with descriptive analysis involving calculations of frequency, percentage, mean, and standard deviations, while inferential statistics, specifically correlation and multiple linear regression analysis, was used to evaluate relationships between variables. The regression model result shows that leadership explains a substantial portion of the variance in employee performance, with an R2 value of 0.703, indicating that about 70.3% of the variability in employee performance can be attributed to the leadership styles in the model. The ANOVA results confirm the overall significance of the regression model, with an F-statistic of 86.926 and a p-value below 0.05. Regarding the Effect of leadership styles on employee performance, Autocratic leadership has a negative coefficient of -0.364, suggesting a 36.4% decrease in employee performance with increased Autocratic leadership. This coefficient is statistically significant (p < 0.001), indicating a detrimental effect on employee performance. In contrast, Democratic leadership and Laissez-faire leadership have positive coefficients. Democratic leadership has a coefficient of 0.276, implying a 27.6% increase in employee performance, while Laissez-faire leadership has a coefficient of 0.316, signifying a 31.6% boost in employee performance. Both coefficients are statistically significant (p < 0.001), highlighting the positive impacts of Democratic and Laissez-faire leadership styles on employee performance.