Leadership Styles and Organizational Performance of Mortgage Finance Companies in Kenya

Abstract

Leadership is critical to organizational effectiveness in dynamic and highly regulated financial markets. However, sector-specific evidence on the relationship between leadership styles and organizational performance among mortgage finance companies in Kenya remains limited. This study examined the relationship between transformational and transactional leadership styles and organizational performance among mortgage finance companies in Kenya. Guided by transformational and transactional leadership theories and a positivist philosophy, the study adopted cross-sectional research design. Structured questionnaires were administered to 195 senior managers from 39 mortgage finance companies licensed by the Central Bank of Kenya. A total of 157 usable questionnaires were returned, representing a response rate of 80.5%. Data were analysed using descriptive statistics, Pearson correlation and regression analysis. Transformational leadership was positively and significantly associated with organizational performance when examined independently, explaining 48.4% of its variance (R² = .484, p < .001). Transactional leadership also demonstrated a positive and significant relationship, explaining 54.6% of the variance (R² = .546, p < .001). In the combined model, the two leadership styles explained 54.9% of the variance in organizational performance (R² = .549, p < .001). Transactional leadership remained positive and statistically significant predictor (β = .937, p < .001), while transformational leadership did not make a statistically significant contribution (β = -0.206, p = .303). The study concludes that transactional leadership had the stronger independent predictive contribution in the combined model. The findings highlight the importance of clear expectations, transparent rewards and performance monitoring, while recognising the potential value of transformational leadership in supporting employee motivation and development.