The Impact of Psychological Safety and Ethical Leadership on Employee Outcomes in the Banking Sector: The Mediating Role of Emotional Exhaustion

Abstract

In banking, employee roles are exposed to and dynamically interact with the competitive, technological, customer, and regulatory demands. This can cause employees to become emotionally exhausted, resulting in poor productivity at a national level. Drawing on the Conservation of Resources Theory, the objective of this study was to understand the extent to which banking employees’ psychological safety and the presence of ethical leadership can create a positive environment where employees’ level of performance and commitment is enhanced and where they become willing to share their knowledge in an effort to protect and promote organizational efficiency and help safeguard the employees’ creativity. This study also examined the emotional exhaustion of banking employees. This study adopted a quantitative, cross-sectional, explanatory research style, and data were self-generated and collected through surveys. Public- and private-sector banking employees were the study population. The data were analyzed quantitatively using the Statistical Package for the Social Sciences (SPSS), and hypothesized relationships were examined through regression analysis with mediation assessed using the Hayes PROCESS macro. The results of this study reveal that psychological safety and ethical leadership positively influence banking employees' performance, commitment, and willingness to share knowledge, thereby protecting organizational creativity. Psychological safety and ethical leadership also influence emotional exhaustion. Emotional exhaustion was found to be a significant mediator in the relationships between psychological safety and ethical leadership, and between psychological and behavioral outcomes and banking employees' performance commitment and knowledge sharing. The results of this study highlight the banking sector’s need for psychological safety and ethical leadership.