Inducing employee performance among state-owned enterprises, through employee ethical behaviour and ethical leadership

Abstract

Purpose

This study aims to examine how ethical leadership enhances the relationship between employee ethical behaviour and the job performance of employees in state-owned enterprises (SOEs).

Design/methodology/approach

This study was a survey, with data collected using a structured questionnaire. The study focused on employees from SOEs in Ghana. The sample covers 238 employees drawn from 10 SOEs. Data was analyzed using structural equation modelling.

Findings

The study concludes that employee ethical behaviour positively influenced the job performance of employees of SOEs in Ghana. The effect of ethical leadership on employee job performance was positively significant. Finally, ethical leadership positively moderated the effect of employee ethical behaviour on the job performance of employees of SOEs.

Research limitations/implications

Future research should look at identifying the specific behaviours of ethical employees that influence improved job performance. Also, future research could conduct a comparative study of private-owned enterprises and SOEs.

Practical implications

Attention should also be paid to ethical leadership, as it strongly enhanced both employee job performance and the quality of employee ethical behaviour required for increased job performance of employees.

Originality/value

Extant studies have paid limited attention to understanding how the interaction between employee ethical behaviour and ethical leadership will enhance employee job performance.

Citation

Dogbe, C.S.K., Ablornyi, K.K., Pomegbe, W.W.K. and Duah, E. (2024), "Inducing employee performance among state-owned enterprises, through employee ethical behaviour and ethical leadership", Social Responsibility Journal, Vol. 20 No. 7, pp. 1378-1397. https://doi.org/10.1108/SRJ-11-2023-0650

1. Introduction

In today’s competitive business landscape, both private and state-owned organizations are increasingly realizing the crucial role of employee behaviour in shaping overall organizational success. Among various aspects of employee behaviour, ethical conduct has gained significant attention as a key determinant of employee performance (Lim et al., 2024). When employees consistently exhibit ethical behaviour, it brings numerous benefits to the organization; such as accomplishing organizational objectives, staying away from negative situations and fostering a positive workplace environment (Jha and Singh, 2023). This emphasis on ethical behaviour is grounded in the understanding that employees, who form the workforce, could be regarded as the lifeblood of the organization and may have a profound impact on the successful achievement of organizational goals. Therefore, any form of unethical behaviour on the part of employees could damage or undermine the successful attainment of organizational objectives.

Al Halbusi et al. (2022) referred to employee ethical behaviour as individual employee acts that advance the performance of a company’s social, moral and eco-friendly goals. Drawing inference from past literature, employee ethical behaviour can generally be described as acting with integrity and upholding high professional standards in accordance with the organization’s set norms, beliefs and ideals and acting in a way that is appropriate and in line with the norms and values of society. Therefore, employee ethical behaviour encompasses a demonstration of an employee’s commitment to achieving the highest level of competence, and fundamental moral principles like truthfulness, justice, equality, integrity, diversity and regard for one’s own rights (Lin et al., 2023; Makena et al., 2023; Pham et al., 2023). It is, thus, crucial for organizations to establish employee ethical behaviours that are underpinned by explicit values, guidelines and sound ethical frameworks.

Previous studies have well established a positive influence between employee ethical behaviour and employee performance which is gaining substantial interest among industry practioners (Bakare, 2023; Prasad and Adhikari, 2021; Jagannadharao & Sirajuddin, 2021). Hence, employers are realizing that fostering a culture of ethical behaviour not only aligns with societal expectations but also has profound implications for individual job performance and the overall organizational effectiveness (Agustian et al., 2023). According to Fein et al. (2023) employee ethical behaviour is a key determining factor of employee quality in job performance levels of employees. Thus, employee performance is an attribute of behaviour that aligns with corporate ethical values.

Employee job performance, therefore, involves how well employees accomplish their work duties in line with organizational expectations (Karyatun et al., 2023; Rohman et al. (2023). Employee performance constitutes a fundamental driver of organizational productivity, profitability and sustainability. High-performing employees contribute to the achievement of strategic objectives, the delivery of quality products and services and the cultivation of positive relationships with customers and stakeholders (Karyatun et al., 2023). In contrast, unethical behaviour can result in severe consequences, such as financial loss, damaged reputation, legal issues and decreased employee morale.

Understanding the relationship between employee ethical behaviour and employee performance is critical for organizations seeking to enhance their productivity and competitive advantage in today’s dynamic business environment. By promoting ethical conduct among employees, organizations can establish a strong foundation for trust, collaboration and positive work relationships that lead to high job performance. Furthermore, ethical behaviour can foster a positive organizational culture that attracts and retains top talent, leading to improved employee engagement, job satisfaction and commitment to organizational goals (Mahurkar et al., 2024).

Extant literature shows that there are many factors that influence improved job performance at both individual and organizational levels. For example, Qabool et al. (2021) identified ethical values, social support, self-efficacy, etc. as some of the factors that may influence the job performance of employees. When employees behave ethically and carry out their work well through efficient utilization of resources with the aim of maximizing output, it results in higher job performance thereby increasing productivity for the organization. Thus, having a highly ethical workforce within an organization is essential to realizing high work performance within organizations.

Although, the relationship between employee ethical behaviour and employee job performance appears to be direct, it is believed that there are intervening factors that could boost or strengthen this relationship. One such important factor is ethical leadership. Ethical leadership has become an emerging phenomenon due to its positive impact on organizational outcomes. Strong empirical evidence shows that ethical leadership is an effective form of leadership exhibited by managers as it is connected with positive employee outcomes (Saxena and Prasad, 2024; Sarwar et al., 2023). Ethical leadership fosters a strong ethical culture within the organization which strengthens employee ethical behaviour in the performance of their job. As a result, attention is being given to understanding the fundamental mechanisms by which ethical leaders can influence employee job performance (Ayesha, 2024).

The study by Holmes (2023) summarizes qualities of ethical leadership, some of which include honesty (exhibiting a high degree of truthfulness), respect for others, assisting others, fairness and involvement in society. According to Morris (2023), honesty, integrity, fairness and compassion are universal normative traits of leader-follower relationships. It suggests that ethical leaders take on personal responsibility for people and make decisions and judgments that are in the best interests of all. A leader’s inner qualities also have an impact on how quickly they make sound judgments that do not compromise ethics.

The significance of ethical practices in state-owned enterprises (SOEs) is of utmost importance to many countries, given their positive outcomes. Thus, this study concentrated on SOEs in Ghana since some of them have underperformed and ought to be shut down or privatized. Some of the existing SOEs’ published financial reports demonstrate that they are underperforming when compared to their counterparts in the private sector. Every year, the Auditor-General’s report on the state of SOEs performance discloses a number of instances of unethical behaviour among public sector employees, which has a detrimental effect on the performance of these SOEs which also affects economic growth (Netswera et al., 2022). Since SOEs are made of people, if things are not working out well as expected, then the problem lies with the people, i.e. the leaders (managers) and followers (employees). It is important to note that while there will always be bad actors, implementing good ethical practices that prioritize greater transparency and adherence to strong ethical standards can help identify and expose the more dishonest individuals within organizations, especially in the context of SOEs, which are currently receiving renewed attention. The studies of Al Halbusi et al. (2022) and Zhu et al. (2023) have shown that leaders who uphold ethics enhance followers’ ethical behaviour by encouraging them to do the same resulting in improved job performance.

In line with this prospect, the study primarily sought to determine how the inter-play between employee ethical behaviour and ethical leadership will induce improved employee performance. While previous empirical studies explored various factors related to ethical behaviour, the direct impact of employee ethical behaviour on job performance remains somewhat unclear. Importantly, no previous studies have specifically examined the moderating role of ethical leadership in the relationship between employee ethical behaviour and job performance. Hence, this study makes a significant contribution by filling this research gap and shedding light on the crucial moderating effect of ethical leadership in this context.

2. Theoretical and hypothesis development

2.1 Theoretical framework

This study was based on two theoretical frameworks, namely, the social learning theory (SLT) and the social exchange theory (SET). The SLT, developed by psychologist Albert Bandura (1977), suggests that individuals acquire behaviour by observing others and imitating actions that they perceive as appropriate. Unlike the behaviourist perspective of B.F. Skinner, which focuses on the impact of the environment and reinforcement on behaviour, Bandura proposed that people can learn through observation, modelling and imitation of others’ behaviours, attitudes and emotional reactions (Hadi et al., 2023). In the workplace, employees may observe ethical behaviour exhibited by their colleagues or leaders and subsequently adopt similar behaviours. As a result, when employees engage in ethical behaviour, it can positively affect their performance by fostering trust, cooperation and organizational citizenship (Ayesha, 2024).

The SET (1958) proposes that individuals engage in social interactions based on a perceived exchange of rewards and costs. According to this theory, people assess the potential benefits and risks of social relationships, and the continuation of a relationship depends on whether the benefits outweigh the costs or vice versa. In the context of ethical leadership, Ayesha (2024) asserts that leaders who prioritize the well-being of their employees and demonstrate fairness and integrity establish a positive social exchange relationship. In response, employees may reciprocate by demonstrating higher levels of commitment and performance. Consequently, Theriou et al. (2024) contend that followers of ethical leaders are more likely to perceive themselves as being in a social exchange relationship with their leaders due to the ethical treatment they receive and the trust they experience. When employees perceive that their leaders genuinely care about their best interests, they are inclined to reciprocate by improving their job performance.

Numerous empirical studies which drew on the role-modelling process (SLT; Bandura, 1977) and the social exchange perspective (Homans, 1958; Blau, 1964) have demonstrated that followers of ethical leaders tend to exert extra effort in their jobs, leading to increased work performance and reduced involvement in deviant behaviours. Figure 1 presents the conceptual of the study.

2.2 Effect of employee ethical behaviour on job performance

Ethics is a range of activities that looks at the motivations behind ethical norms in society or an individual. It also affects how people behave in different circumstances, including what is right or wrong, good or bad and just or unjust (Baggini and Fosl, 2024). Employee ethical behaviour, according to Bag et al. (2023), is the behaviour of employees in a firm or organization that complies with the rules, guidelines and moral standards that govern the right course of action. Also, Renusha and Opatha (2023) defined employee ethical behaviour as “to act in ways consistent with what society and self usually think is morally accepted” as “good” and “right”, as opposed to “bad” or “wrong” behaviour in a particular situation. Guo et al. (2023) identified some examples of employee ethical behaviours which are whistleblowing, truthfulness, maintaining confidentiality, avoiding unfair treatment, avoiding abuses of power, rule-abiding avoiding conflicts of interest, respecting intellectual property, avoiding defamation of others and avoiding workplace bullying. According to the authors, when these behaviours are demonstrated by ethical employees, it helps to promote better job performance in the organization.

The study of Rivaldo and Nabella (2023) revealed a strong kinship between the ethical behaviour of employees and their job performance. Their result indicated that employee ethical behaviour served as a reliable predictor of job performance. According to Pham et al. (2023) employees that have better ethical behaviour other than co-workers who do not exhibit ethical behaviour, are typically more productive in the performance of their job. It also suggests that encouraging ethical behaviour in employees can help organizations operate well. Drawing on the SET (Homans, 1961; Blau, 1964) which supports the concept that, recognizing and rewarding employees for exhibiting ethical behaviour can lead to a reciprocal relationship where employees respond by enhancing their job performance. By establishing a culture of recognition and appreciation for ethical conduct, organizations can foster a positive work environment, promote ethical behaviour and ultimately reap the benefits of improved employee performance and organizational success.

This leads to the following hypothesis:

H1.

Employee ethical behaviour has a positive effect on job performance.

2.3 Effect of ethical leadership on job performance

Ethical leadership has been defined by Brown et al. (2005, p. 120) as “the demonstration of normatively appropriate conduct (e.g., honest, trustworthy, fair, and caring) through personal actions and interpersonal relationships, and the promotion of such conduct to followers through two-way communication, reinforcement through providing ethical standards, rewarding ethical conduct, and disciplining the wrongdoers, as well as decision-making by understanding the importance of their deeds”. They added that ethical leaders can be grouped into two: the moral person and the moral manager. The moral person comprises trustworthiness, integrity, fairness and concern for others while the moral manager involves defining ethical standards, role modelling ethical behaviour, communication, rewarding and punishing.

Due to the importance of ethical leadership, a number of studies were conducted on the functions that ethical leaders can undertake to improve employee job performance. According to Ali et al. (2021), there is a correlation between the job performance of followers and ethical leadership. The mechanism through which leaders affect employee performance is described by the SLT. This idea contends that leaders affect their followers through role modelling (Ali et al., 2021; Yasin et al., 2021). That is, an employee can learn acceptable behaviour at work through leaders’ role modelling in the way they perform their job. Leaders who uphold moral principles draw in and inspire their teams to succeed. The SET also offers a compelling explanation for the link between ethical leadership and employees’ job performance, since workers tend to form close bonds with their leaders as a result of their emotional connections with them.

According to Bakare (2023), when it comes to the relationship between ethical leadership and employee job performance, there is a powerful influence leaders have on the ethical atmosphere within a company through the communication and implementation of ethical practices. In addition, ethical leaders promote the ethical and fair treatment of subordinates by fostering a collaborative and positive work environment where employees become supportive of one another's growth and exhibit the same ethical behaviours toward their organization (Nejati et al., 2020; Sarwar et al., 2023). The findings of Amirudin and Nugroho (2022) showed that ethical leadership improves the work performance of employees, thereby increasing work output. According to their findings, leaders' ability to model normatively acceptable behaviour, and offer guidance and assistance has an impact on how well employees accomplish their jobs.

When long-term social exchange relationships develop between ethical leaders and their followers, it creates partnerships and as a result, a higher emphasis is placed on intrinsic and intangible qualities which help employees to improve upon their job performance. High-quality social exchange interactions frequently result in feelings of personal responsibility since the parties directly follow the law of reciprocity (Zhu et al., 2023; Srivastava and Madan, 2022). Therefore, there is a high probability that ethical leaders would establish rewarding social exchange relationships with their workforce by treating them with care and fairness. Employees are then willing to give back by engaging in better work-related behaviour and helping the company and their co-workers. In this way, ethical leaders can improve how well employees perform at work. Based on these findings, it is hypothesized that:

H2.

Ethical leadership positively impacts job performance.

2.4 The moderating role of ethical leadership on employee ethical behaviour and job performance

Positive personal traits are present in an ethical manager, and they actively promote ethical behaviour among their staff. Ethical leadership exemplifies controlled behaviour in interpersonal interactions in the organization that is intended to reinforce and enhance the ethical behaviour of workers (Al Halbusi et al., 2022). The need of upholding ethical standards and treating everyone with reverence and honesty is something that effective leaders emphasize to their teams (Abu Bakar and Connaughton, 2023).

Studies that have sought to explain how ethical leadership affects follower behaviour mostly use the SLT (Bandura, 1977) and the SET (Homans, 1961). Observing, modelling and imitating the behaviour of other people, attitudes and emotional reactions is essential, according to the social learning hypothesis. The SLT takes into consideration how environmental and mental factors interact to affect human cognition and behaviour.

Through strong relationships with organizational members, ethical leaders aim to instil ethical behaviour in all of their followers. This increases the possibility that organizational members will establish trust not only with the leader but also with other team members (Baldassari et al., 2023; Imam and Kim, 2023). According to past research on ethical leadership, it is clear that ethical leadership affects employees' ethical behaviour (Al Halbusi et al., 2022; Imam and Kim, 2023). Recent studies have shown that ethical leaders can significantly affect their followers' ethical behaviour by communicating with them on a daily basis (Al Halbusi et al., 2021).

According to Blau's (1964) SET, exchanging social and material resources is a key aspect of human connection. Sadeghi and Baghbani (2023) viewed this theory as being appropriate for looking into whether and how followers are encouraged to take responsibility while being supervised by an ethical leader. This view has been promoted by academics as a potential intervening mechanism for ethical leadership to affect the employee's behaviour connected to their job performance (Al Halbusi et al., 2021; Farouk and Jabeen, 2018). Again, Sadeghi and Baghbani (2023) added that employees regard ethical leadership as a higher-quality social exchange relationship, and this social exchange would lead to sentiments of personal trust, gratitude and responsibility. As this happens, it influences the employees’ behaviour which will positively translate into their job performance.

More so, when employees work under ethical leaders, their knowledge about the right things to do and proactive habits tend to improve, which can lead to more innovative ideas (AlMulhim and Mohammed, 2023), and these ideas will be applied in work activities to improve their job performance (Aftab et al., 2021a, 2021b). This helps to provide an understanding of how people respond to ethical leadership. According to Saxena and Prasad (2024), ethical leadership implies that ethical leaders exhibit particular personality qualities, engage in particular actions and make decisions in accordance with ethical standards. These leaders uphold integrity, are dependable, act morally upright and adhere to moral principles when making decisions. Khan et al. (2024) found that business managers with an ethical leadership disposition are more likely to create an environment that supports their subordinates' attitudes and behaviours. Following ethical leaders can encourage employees to act ethically in a number of ways. Thus, according to the cognitive process approach, which supports the SET, an ethical leader’s character traits such as integrity, honesty, fairness and transparency can lessen followers’ safety anxieties (Goswami and Agrawal, 2023).

Furthermore, research based on SLT by Ayesha (2024) suggested that through subordinates’ empowerment and encouragement to internalize ethical behaviour, ethical leaders may improve the performance of their followers. In numerous organizational contexts, such as healthcare, education and manufacturing, empirical research has examined the relationship between ethical leadership and employee performance and has shown that ethical leadership is positively associated with an increase in followers' job performance. According to Ali et al. (2023) and in accordance with the SLT and the SET, Ayesha (2024) asserted that an ethical leadership style produces positive workplace outcomes, including successful job performance and positive employee behaviours. Their study found that ethical leadership was positively correlated with employee in-role performance.

As a result, subordinates identify as participants in social interactions with their leaders, and when they believe that these interactions are fair, they will respond by going above and beyond their formal job responsibilities to complete tasks more thoroughly (Perlman et al., 2024; Nejati et al., 2021), which has an impact on employee job performance. The research of Aftab et al. (2022) also demonstrated that leaders' fair and ethical behaviour in Italian SMEs is very significant since there is a greater likelihood that leaders' personal ethics will influence corporate ethics. According to Aftab et al.’s (2022) findings, ethical leadership enhances worker performance and is essential for the viability of small and medium-sized businesses (SMEs). Again, the study of Aftab et al. (2023), reinforced past research that suggests ethical leadership contributes to the improvement of employee work performance. Following the above, it is hypothesized that:

H3.

Ethical leadership has a positive moderating effect on the relationship between employee ethical behaviour and job performance.

3. Methodology

3.1 Population, sample, sampling technique and data collection procedure

The study focused on employees among selected SOEs in Ghana. SOEs here represents businesses created and managed by a country’s government to address economic and social demands such as employment, societal and political needs and operating in economic sectors with strategic value to the state. The study used a simple random sampling method to select ten (10) SOEs for inclusion. In addition, a convenience sampling approach was used to collectively draw a sample of 300 employees from these 10 SOEs to serve as respondents. Each of the selected SOEs received a set of 30 questionnaires to attain the targeted total number of 300 respondents, and the employees who participated in the study were conveniently selected based on their availability and willingness to participate.

The sample size was determined out of the population size of about 1,200 employees in the 10 sampled SOEs, using Miller and Brewer’s (2003) formula which is indicated as follows:

n=N1+N(α2)

where, N = population, n = sample size, α = significant level. Ninety five percent was chosen as the confidence interval for the study and the margin of error as 5%. Using the formula, the sample size was, therefore, calculated as N = 1,200 and α = 0.05.

Therefore,

n=12001+1200(0.052)n=300

Hence, the sample size of 300 was considered adequate for the study.

Prior to the start of the data gathering, ethical clearance was sought, of which a copy, together with the cover letter, were sent to targeted SOEs. After acceptance was given by the SOEs, the data collection process was initiated. The study adopted a printed questionnaire, which was interviewer administered. However, the contact details of the principal investigator were indicated on the questionnaire, so respondents could call for clarification when necessary.

The expected completed questionnaires were 300, however, 238 questionnaires were realized after 8 weeks of data collection process. This gave a response rate of 79.33% (238/300)*100, of which the researchers considered adequate enough for the study.

3.2 Demographic profile of respondents

Table 1 presents a demographic overview of the respondents. A total of 238 employees completed the questionnaire, with the majority being male, accounting for 66.8% of the respondents, while females made up 33.2%. The age range of the respondents varied from 25 to 60 years, with the largest proportion falling within the 31–40 age group, which constituted 65.1% of the total. In terms of educational background, the majority of respondents, comprising 46.2%, had completed undergraduate degrees. Post-graduate degree holders accounted for 28.6% of the respondents, while the lowest proportion, 25.2%, were diploma holders. Regarding work experience, the highest number of respondents, at 48.3%, had worked in the SOEs for duration of 11–15 years. Those with over 20 years of experience represented 25.5% of the respondents, followed by the 16–20 years category at 16.8%. The lowest proportion, 9.2%, had between 5 and 10 years of work experience in descending order. Since none of the respondents had less than 5 years of work experience, it shows that they had fairly adequate knowledge about the work they do and the organization itself and could give appropriate responses that reflects the true state of affairs in achieving the objective of the study.

3.3 Measurement of variables

The measures for ethical leadership were adapted from Brown et al. (2005). A total of five items were used to measure ethical leadership, which were: “my boss conducts his/her personal life in an ethical manner”, “my boss defines success not just by results but also the way that they are obtained”, “my boss listens to what employees have to say”, “my boss disciplines employees who violate ethical standards” and “my boss makes fair and balanced decisions”.

The measures for employee ethical behaviour were adapted from Podsakoff et al. (1997), which includes: “volunteering to help others in the organization if they fell behind in their work”, “willingly sharing his/her expertise with other members in the organization”, “tried to act like peacemakers when other members in the organization had disagreements”, “took steps to try to prevent problems with other members in the organization” and “willing to sacrifice time to help other members in the organization who had work-related problems”.

Finally, the measures for job performance were adapted from Ramos-Villagrasa et al. (2019), which were seven items. These include: “I always manage to plan my work so that I finish it on time”, “I always keep in mind the work results I needed to achieve”, “I am able to set priorities right”, “I am able to carry out my work efficiently”, “I work on keeping my job-related knowledge up-to-date”, “on my own initiative, I start new task when my old tasks are completed” and “I am able to come out with creative solutions to new problems”.

Four controlled variables used in the data analysis were gender (male and female), employee’s age (25–30 years; 31–40years; 41–50years and 51–60years), level of education (ranging from Diploma to postgraduate to check the level of their educational qualifications) and number of years with the organization i.e. experience levels. With the exception of the control variables, all other variables were measured on a five-point Likert scale of 1 = strongly disagree, to 5 = strongly agree.

3.4 Common method bias

A number of approaches were adopted to assess the common method bias (CMB) of this study (Podsakoff et al., 2012). Procedurally, the study pilot-tested the questionnaire, which enabled all ambiguous questions or statement to be corrected before the main data collection exercise. Furthermore, all points on the five-point Likert were labelled, instead of just labelling the endpoints (e.g. 1 = strongly disagree, 2 = disagree, 3 = indifferent, 4 = agree and 5 = strongly agree).

Harman’s one-factor test was run, as a statistical measure of CMB (Borah et al., 2023). Results demonstrated that, when the extracted factor was fixed at 1, the single extracted factor had a variance of 31.44% (less than 50%). This indicates that, no single factor explained the majority of the variance in the model. Therefore, it was concluded that the data set for the study had no CBM issues (Podsakoff and Organ, 1986).

3.5 Reliability and validity of the constructs

Confirmatory factor analysis (CFA) was run using Amos (v.23). The basis for the computation of the CFA was grounded on maximum likelihood, which evaluated how well the data fit our model. In respect of the CFA, it was anticipated that the CMIN would be statistically insignificant at 5%, chi-square/degree of freedom would be less than 3, PClose would be more than 0.05, goodness-of-fit index would be greater than 0.8, normed fit index, Tukey-Lewis index. and comparative fit index would be greater than 0.9 and that RMSEA and root mean square residual would also be anticipated to be less than 0.08 (Hair et al., 2010). As can be observed from Table 2 and Figure 2, all the required fit indices were achieved in accordance with their respective thresholds. As a result, we draw the conclusion that our CFA model for the constructs adequately matched the data.

In addition, all of the constructs’ average variance extracted (AVE) exceeded the criterion set by Fornell and Larcker (1981, which is 0.5). As anticipated, Cronbach’s alpha (CA) and composite reliability (CR) were likewise higher than 0.7 (Bamfo et al., 2018). The findings also revealed that the measurement variables’ least standardized factor loading was 0.6. This demonstrates that the measurement items strongly explained their corresponding latent variables and that the measurement items were reliable in loading onto each latent variable.

To determine the discriminant validity, the AVEs squared root (√AVEs) and intercorrelation values were compared. The smallest AVE should be bigger than the highest correlation value to establish discriminant validity (Amoako et al., 2022). The analysis revealed that the smallest √AVEs was 0.733, exceeding the maximum matching correlation value of 0.602 (Table 3). This suggests that the study’s discriminant validity was attained.

4. Results

Table 4 and Figure 3 both contain the results of the structural equation modelling. The study took into account the respondents’ gender, age, educational attainment and work experience measured by the number of years spent with the company. The findings indicated that work performance was positively impacted by gender, age and education, but these effects were statistically insignificant. However, the number of years that an employee had spent working for the SOE had a substantial positive impact on their job performance (β = 0.177; p 0.05). This suggests that respondents who had worked for their respective SOEs for a longer period of time were assessed as much more productive at their jobs.

For starters, the study sought to ascertain the effect of employee ethical behaviour on employee job performance levels in SOEs. According to the findings, an employee’s ethical behaviour significantly improved their ability to accomplish their job performance (β = 0.394; p < 0.01). The coefficient illustrates that high-quality employees’ ethical behaviour enhanced their job performance by 39.4%. Therefore, H1: “Employee ethical behaviour has a positive effect on job performance”, was, thus, supported.

Secondly, the study examined the possible impact of employee ethical leadership on employee job performance at SOEs, and discovered a statistically significant positive effect (β = 0.435; p < 0.01). It follows that an ethical leadership approach would have improved employee work performance by about 43.51%. This component, which had the greatest impact on the estimated model, demonstrated the crucial part that ethical leadership plays in assisting state-owned companies in reaching high levels of job performance. Hence, H2: “Ethical leadership positively impacts job performance,” was, thus, supported.

The study finally evaluated ethical leadership’s moderating effect on the relationship between employees’ ethical behaviour and job performance in SOEs. The z-score approach was used in calculating the interaction term (EEB_EL) by multiplying the z-scores of both employee ethical behaviour and employee job performance. The interaction term significantly improved employee job performance, according to the results shown in Table 4 (β = 0.127; p < 0.01). Figure 4 showed that when ethical leadership and employee behaviour were both at high levels, work performance was at its best (orange line). However, when employee ethical behaviour was high but ethical leadership was low, the job performance score was substantially lower (blue line). This demonstrates that ethical leadership positively moderated the connection between the ethical behaviour of employees of SOEs and job performance. Therefore, H3: “Ethical leadership has a positive moderating effect on the relationship between employee ethical behaviour and job performance,” was, thus, supported.

5. Discussion of results and theoretical contribution

Employee ethical behaviour was identified to positively influence employee job performance levels in SOEs. Employee ethical behaviour, according to Bag et al. (2023), is the behaviour of employees in a firm or organization that complies with the rules, guidelines and moral standards that govern the right course of action. As indicated by Bag et al. (2023), employees who exhibit ethical behaviours adhere to keeping the standards of the organization with a focus on their actions that will help in achieving the goals of the organization. This ethically responsible behaviour causes a great positive change in employee attitudes toward job performance and refrains employees from behaviours that may harm the prospects of the organization. Employees who adopt a high standard of ethical behaviour are, thus, able to contribute positively to creating a good ethical climate that facilitates work performance. Furthermore, the relationship between employee ethical behaviour and the job performance of employees of SOEs was found to be significantly positive. This was in line with Pham et al. (2023) who found a direct positive relationship between employee work ethics and job performance, indicating that employees that exhibit a better work ethic in their behaviour than their co-workers are typically more productive. This finding further contributes to SET (Homans, 1961; Blau, 1964), which indicates that employees will reciprocate by improving their job performance to the organization’s benefit when they act ethically because of the ethical environment in which they find themselves.

It was further identified that ethical leadership style had a relatively high positive significant effect on the job performance of employees, thereby aligning with studies such as Ali et al. (2021) and Amirudin and Nugroho (2022) and this indicates that the influence of ethical leadership significantly improves job performance. Finally, the relationship between employee ethical behaviour and employee job performance was found to be positively moderated by ethical leadership. This indicates that application of an ethical leadership style by managers of SOEs will strengthen the desired effect of employee ethical behaviour on job performance. This finding was similar to a past study premised on SLT by Ayesha (2024) which indicated that by empowering subordinates and encouraging them to internalize ethical behaviour, ethical leaders may improve the performance of their followers.

Although findings of past studies such as Aftab et al.’s (2022) and Aftab et al. (2023) predict ethical leadership to have a direct influence on employee work performance, this present study found that when ethical leadership positively influences employee ethical behaviour, it will strengthen a positive impact of ethical behaviour of employees on their job performance. As indicated by AlMulhim and Mohammed (2023), employees who work under ethical leaders improve their knowledge and proactive habits which can lead to increased job performance. When ethical leaders with good personality qualities act in ways that are seen as acceptable in accordance with ethical standards through upholding their integrity and adhering to moral principles when making decisions, it makes ethical leaders to be dependable and this influences the commitment level of the employees to also replicate same and give off their best form of job performance. Trustworthiness, honesty, fairness and care are some key qualities that ethical leaders demonstrate through personal actions and interpersonal relationships. These qualities are to be promoted through communications with organizational members, and in maintaining established ethical standards, provide new ones in line with prevailing conditions. The ethical leader needs to set examples to encourage ethical behaviour by rewarding the ethical conduct of employees who exhibits high ethical behaviour and at the same time disciplining unethical conduct to discourage and correct the wrongdoers of such acts.

This research, thus, adds to Bandura’s SLT (1977). According to the SLT, observing, modelling and imitating the behaviour of people, their attitudes and emotive reactions is essential. The interplay between environmental and psychological elements that influences human behaviour and thought processes is taken into account by the SLT. So, considering the general perception that workers in state enterprises are not serious with the work and do their work anyhow, it takes leadership on how they will act and conduct themselves ethically well by exhibiting all the ethical leadership qualities and principles to change the atmosphere at the workplace. As the managers model ethical leadership behaviours, the followers will observe, learn and imitate these behaviours. These will change their attitude to work to also behave ethically which will result in a higher job performance, thereby increasing productivity.

In conclusion, this study significantly advances ethical behaviour, ethical leadership and job performance literature. Only a few past studies have demonstrated that employees’ ethical behaviour has an impact on their job performance but the moderating variable that strengthens and enhances this connection is still not well-established. This study partially covers this gap and emphasizes senior managers’ ethical leadership as a key potential moderator between employee ethical behaviour and employee job performance.

6. Practical/managerial implications

The results of this study have practical implications for organizations aiming to improve employee performance and foster an ethical work environment. The findings have recognized employee ethical behaviour to have a positive impact on job performance. Ethical leadership has also been found in this present study as a crucial driver of high job performance levels of employees. This is because effective ethical leadership has both a direct positive effect on job performance and a direct positive effect in strengthening the kinship between employee ethical behaviour and job performance. By recognizing the significant roles of employee ethical behaviour and ethical leadership, SOEs and organizations in general can prioritize the promotion of the following to induce improved employee performance:

• Adapt ethical leadership styles: While the core principles of ethical leadership remain consistent, it is essential for organizations to adapt ethical leadership style to align with their cultural context. Therefore, organizations should encourage leaders to demonstrate normatively appropriate conduct by clearly communicating the organization’s vision and mission to employees. Ethical leaders should exhibit integrity, live the core values and ethical principles of the organization and show care and fairness towards employees in a way that is culturally sensitive and respectful.

• Disciplinary actions for unethical behaviour: Organizations should establish disciplinary measures for employees engaged in unethical acts. The primary aim of disciplinary actions should be to deter others from engaging in similar behaviour while also focusing on correcting the individuals involved. The approach to discipline should be fair, consistent and appropriate within the given cultural context to maintain trust and respect.

• Reporting systems and whistleblower protection: Create reporting systems that allow employees to report cases of unethical conduct confidentially. Whistleblowers should be protected from retaliation to encourage a culture of accountability and transparency.

• Fairness in dealing with unethical behaviour: Ensure fairness in the handling of disciplinary cases related to unethical conduct. Treat all employees equally, regardless of their managerial positions, when addressing ethical violations. This promotes trust and confidence in leadership.

• Cultivate an ethical organizational culture: Leaders should be intentional about creating an ethical culture within the organization that transcends cultural boundaries. This involves promoting and internalizing ethical behaviour in employees by setting a positive example, providing ethical training and development programs and aligning ethical values with organizational goals.

• Hiring and selecting ethical individuals: Human resource managers should focus on selecting and preparing ethical individuals for management positions. Thorough background checks and assessment tools can be used to identify candidates who exhibit fundamental ethical behaviours during the recruitment and selection process.

• Onboarding and training: Initiate a culture of ethical behaviour in new employees through comprehensive onboarding processes and subsequent training programs. These programs should aim to develop managers who can make ethical decisions and exemplify ethical conduct in their day-to-day operations.

• Establish effective communication channels: Senior ethical leaders should use communication as a key tool to promote and increase ethical behaviour among their followers. Establish smooth vertical communication channels (top-down and down-top) to facilitate the exchange of relevant information and foster an ethical culture within the organization.

• Reward ethical behaviours: Reward systems should also be created to reward employees for exhibiting exemplary ethical behaviour to motivate others to also live by a high ethical standard in the organization.

By implementing these practical implications, organizations can enhance productivity by fostering ethical leadership, promoting employee job performance and creating a positive and ethical work environment.

7. Conclusions

The study was based on three hypotheses, which were H1: “Employee ethical behaviour has a positive effect on job performance”; H2: “Ethical leadership positively impacts job performance” and H3: “Ethical leadership has a positive moderating effect on the relationship between employee ethical behaviour and job performance”. The results of the study concluded that employee ethical behaviour positively influenced the job performance of employees of SOEs in Ghana. It was further concluded that the effect of ethical leadership on employee job performance was positively significant. Finally, the study concluded that ethical leadership positively moderated the effect of employee ethical behaviour on the job performance of employees of SOEs in Ghana. All hypotheses were, thus, supported by this study.

These findings could be an orientation for company leaders to continuously interact with exemplified ethical leadership with ethical employees by listening to them, respecting their opinions and caring for their well-being with the resultant aim of a significant improvement in job performance.

8. Limitations and future research suggestions

Firstly, the cultural context of the study, namely, Ghana, limits the conclusions because what is regarded as ethical in one cultural context might not be an ethical issue in another. Therefore, to boost the study’s generalizability, we suggest future research to carry out such a study in different cultures.

The second limitation is that the spread of the respondents did not cover the representation of all employees in all the SOEs in Ghana. It only sampled 10 of 47 SOEs in Ghana and this may not be representative enough of employees in all the SOEs. Future research can broaden the sampling frame to increase the number of data points.

The third limitation is that the study did not examine specific dimensions of employee ethical behaviour that may account for enhancing employees’ job performance. Future studies should focus on identifying particular categories or dimensions of employee ethical behaviour such as openness, transparency, truthfulness and avoiding conflict of interest that may be related to influencing improved job performance.

Finally, the study did not pay particular attention to the extent of the impact of unethical behaviours on both job performance and organizational performance. Future research could focus attention in this direction.

Figures

Figure 1

Conceptual framework

Figure 2

Confirmatory factor analysis

Figure 3

Structural equation model

Figure 4

Two-way interaction plot

Table 1

Demographic profile of respondents

Profile of respondents	Frequencies (N)	%
Gender	238	100
Male	159	66.8
Female	79	33.2
Age	238	100
25–30 years	22	9.2
31–40 years	155	65.1
41–50 years	39	16.4
51–60 years	22	9.2
Education	238	100
Diploma	60	25.2
First degree	110	46.2
Post-graduate degree	68	28.6
Experience	238	100
5–10 years	22	9.2
11–15 years	115	48.3
16–20 years	40	16.8
Above 20 years	61	25.6

Source: Authors’ own creation

Table 2

Confirmatory factor analysis (CFA)

Model-fit indices CMIN = 148.481; DF = 113; CMIN/DF = 1.314; GFI = 0.932; PClose = 0.928; TLI = 0.978; CFI = 0.982; RMSEA = 0.036; RMR = 0.055	Factor loading
Employee ethical behaviour (EMPL): CA = 0.884; CR = 0.883; AVE = 0.605
EEB1	0.600
EEB2	0.787
EEB3	0.878
EEB4	0.822
EEB5	0.773
Ethical leadership (LEAD): CA = 0.845; CR = 0.853; AVE = 0.538
EL1	0.667
EL2	0.765
EL3	0.714
EL4	0.787
EL5	0.729
Employee performance (PERF): CA = 0.912; CR = 0.912; AVE = 0.599
JP1	0.704
JP2	0.672
JP3	0.748
JP4	0.829
JP5	0.884
JP6	0.805
JP7	0.756

Source: Authors’ own creation

Table 3

Descriptive and discriminant validity

Variables	Mean	SD	1	2	3	4	5	6	7
Gender (1)	–	–	–
Age (2)	–	–	−0.504**	–
Education (3)	–	–	0.033	0.077	–
Experience (4)	–	–	−0.474**	0.381**	−0.045	–
EMPL (5)	3.740	0.885	−0.010	0.031	0.067	0.018	0.778
LEAD (6)	3.890	0.875	−0.338**	0.445**	0.075	0.399**	0.519**	0.733
PERF (7)	3.843	0.926	0.058	0.090	0.022	0.124	0.602**	0.557**	0.774

Notes:

** ∼ Correlation is significant at the 0.01 level (two tailed); * ∼ Correlation is significant at the 0.05 level (two tailed); √AVE ∼ Bold and Italics

Source: Authors’ own creation

Table 4

Path coefficients

Paths	Unstd. estimates	S.E.	C.R.
Gender → PERF	0.229	0.120	1.912
Age → PERF	0.071	0.075	0.940
Education → PERF	0.022	0.063	0.347
Experience → PERF	0.177	0.059	3.018**
EMPL → PERF	0.394	0.068	5.794**
LEAD → PERF	0.435	0.106	4.104**
EEB_EL → PERF	0.127	0.051	2.497*

Notes:

** ∼ Coefficient is significant at the 0.01 level (1%); * ∼ Coefficient is significant at the 0.05 level (5%)

Source: Authors’ own creation