Exploring the influence of ethical leadership on employee performance: the mediating role of Islamic work ethic

Purpose This study aims to explore the impact of ethical leadership on task performance and contextual performance, with Islamic work ethics serving as a mediating variable in the banking sector. The research gap examines how ethical leadership influences employee performance within the dynamic context of Indonesia’s banking industry. Design/methodology/approach A quantitative approach was used, using structural equation modeling to analyze data from banking employees in Lampung, Indonesia. Data were gathered through validated questionnaires, and SmartPLS 4 was used for analysis. The Islamic work ethics measurement was modified with a Likert scale featuring customized items to reduce social desirability bias. Findings This study finds that ethical leadership significantly impacts contextual performance but does not directly influence task performance. Islamic work ethics mediates the relationship between ethical leadership and both performance dimensions, indicating that it enhances the positive effects of ethical leadership on employee performance. Research limitations/implications The research is limited to the Indonesian banking sector, potentially restricting the generalizability of the findings. Future studies should explore these relationships across different cultural and industrial contexts. Practical implications By fostering ethical leadership and reinforcing Islamic work ethics, banks can improve individual task outcomes and sustain organizational effectiveness. Social implications This study underscores the importance of integrating ethical leadership with culturally relevant values, such as Islamic work ethics, to optimize employee performance. Originality/value The research adds to the literature by highlighting the critical role of Islamic work ethics in mediating the relationship between ethical leadership and employee performance in the banking sector.