Leadership Styles and Financial Decision-Making in Organizations: A Qualitative Theory-Building Review

Financial decision-making is a key management task that has profound effects on organizational performance, sustainability and value creation over time. Although the previous studies have mostly investigated financial decision-making based on quantitative models and economic rationality, the impact of leadership styles in influencing managerial decision-making process of finance has been under theorized. This paper address this gap by assuming a secondary qualitative, theory-building methodology to study the effect of leadership styles in financial decision-making in organizations. The paper is based on a thematic synthesis, where recurring trends are identified that relate leadership behaviors with financial decision processes through systematic review of the existing peer-reviewed literature, conceptual studies, and authoritative organizational reports. Findings indicate that leadership styles can affect the financial decision-making process through its impact on the managerial risk orientation, strategic time horizons, ethics and information interpretation. Through the combination of the lessons learned through the lens of the leadership theory, the literature on financial decision making, this paper will establish a conceptual framework that will contribute to the theoretical knowledge in the interface of finance and management. The research study is an addition to the literature as it provides a process view on financial decision-making and offers a basis of possible future empirical studies.