Islamic work ethic and organizational justice as mediators for transformational and transactional leardership and work outcomes

Abstract

The purpose of this study is to test the model consisting of transformational and transactional leadership, Islamic work ethic, organizational justice, and work outcomes in a unique organizational context of microfinance institutions in Indonesia. Specifically, this study examined the mediating role of Islamic work ethic and organizational justice in linking transformational and transactional leadership and job satisfaction, organizational commitment and turnover intention. Using structural equation modelling (SEM), the model was tested using a sample of 370 employees from 60 institutions of Islamic microfinance in Central Java, Indonesia. The empirical tests indicated that transformational leadership has a significant effect on Islamic work ethic and procedural justice. Also, Islamic work ethic has significant impact on three dimensions of organizational justice. Furthermore, procedural justice has significant effect on all the three work outcomes, while distributive justice has significant effect on organizational commitment and job satisfaction. However, the study did not find any significant effect of transactional leadership on Islamic work ethic as well as of distributive justice on turnover intention. Moreover, non-significant effects were also found between interactional justice on all three work outcomes. Finally, the finding indicated the mediating role of Islamic work ethic and organizational justice.