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.