Shared Transformational Leadership and Organization Culture as Predictors of a Bank’s Financial Performance

Do both shared transformational leadership and organizational culture affect a firm’s bottom line directly? We answer this question with a representative sample of 58 autonomous local banks of a Dutch financial institution; 1509 employees completed a questionnaire on shared transformational leadership and organizational culture, covering five organizational-culture dimensions: external orientation; interdepartmental cooperation; human-resource orientation; empowerment; and improvement orientation. Bank-level financial performance data were available: in the same year and two years later. Results of structural equation modeling, in which we control for time-1 performance, showed that shared transformational leadership at the top increase a bank’s financial performance, while organizational culture does not. Both leadership and culture appear significantly related to perceived firm performance and shared transformational leadership significantly linked to each culture dimension; these results were controlled for common-source bias. We conclude that shared transformational leadership significantly affects a firm’s short-term financial performance while longer time intervals are needed for empirical reports on the possible financial effects of (investing in) organizational culture