LMX and employee satisfaction: mediating effect of psychological capital

Purpose The purpose of this paper is to investigate the relationship between leader-member exchange (LMX), job satisfaction (JS), life satisfaction (LS), and psychological capital (PC) for employee relation management. Design/methodology/approach A total of 319 valid questionnaires were received from employees of financial and electronics manufacturing industries in Taiwan, and they were then analyzed using a structuring equation model with SPSS 12.0 and LISREL 8.8. Findings Good LMX increases psychological capital. Psychological capital enhances both JS and LS, and psychological capital serves as a full mediator for both JS and LS. A moderating effect of industrial characteristics is found between LMX and LS and between psychological capital and LS. Practical implications The findings suggest that managers need to focus on leadership style in order to develop employees’ life and JS through building psychological capital. Originality/value This study not only obtained further support for predictions derived from the LMX theory but was also a more extensive analysis of the meaningful relationships between job and LS with a mediating effect of psychological capital on employee relation management.