Leadership Styles and Their Impact on Firms’ Profits among SMEs: A Moderating Effect of Effective Communication

Purpose: The purpose of this study is to shed light on the importance of leadership style for the firms’ profitability along with the moderating effect of effective communication in the context of Malaysian SMEs. Design and Method: The study adopted a quantitative approach for which the data was gathered from 359 managers of SMEs operating in Kuala Lumpur, Malaysia. The study utilised the SEM technique in order to analyse the moderating effect of effective communication in the relationship between leadership style and firms’ performance. Findings: There is a positive and significant relationship between effective communication between leadership style and firms’ performance. Meanwhile, the moderating effect of effective communication affecting this relationship has also been found as positive and significant. Limitations: The study has focused merely focused on the SME sector of Malaysia meanwhile, the absence of qualitative evidence is some of the limitations of this research.