Abstract:
This study examined the effect of leadership on financial performance of SMEs. The study was guided by the following objectives notably, to examine the effect of transformational leadership style on financial performance of SMEs, to examine the effect of transactional leadership style on financial performance of SMEs and to assess the effect of laissez-faire leadership style on financial performance of SMEs in Uganda. The study used a cross sectional research design, and a quantitative approach. Data was collected from a target population of 101 of employees with accessible unit of 80 of employees in SMEs, using simple random and purposive sampling techniques. Data were collected with the aid of closed ended questionnaire and Statistical Packages for Social Sciences was employed for analyzing data from which frequency tables, descriptive statistics (mean and standard deviation), reliability, validity, correlation, and regression results were obtained. The study findings revealed that there is a positive and a significant effect of transformational leadership style and financial performance of SMEs, transactional leadership style and financial performance of SMEs and laissez-faire leadership and financial performance of SMEs. The study concludes that there is a strong predictive power that the dimensions of leadership contribute towards enhancing financial performance of SMEs in Mbale City. Finally, the study, recommends that efforts to improve the financial performance of SMEs depends on leadership (transformational, transactional and laissez-faire leadership styles).
