Management Decision

Ethical leadership and work engagement: The roles of psychological

empowerment and power distance orientation
Israr Ahmad, Yongqiang Gao,
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9, pp.1991-2005, https://doi.org/10.1108/MD-02-2017-0107
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Ethical
Ethical leadership and work leadership and
engagement work
engagement
The roles of psychological empowerment
and power distance orientation 1991
Israr Ahmad and Yongqiang Gao Received 14 February 2017
School of Management, Huazhong University of Science and Technology, Revised 6 July 2017
10 December 2017
Wuhan, China 28 February 2018
Accepted 2 April 2018

Abstract
Purpose – The purpose of this paper is to investigate the mediating role of psychological empowerment in
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the relationship between ethical leadership and employee work engagement as well as the moderating effect
of power distance orientation.
Design/methodology/approach – With a multi-wave survey, this paper uses a sample of 251 employees
from the banking sector in Pakistan to test the hypotheses.
Findings – The results reveal that psychological empowerment partially mediates the relationship between
ethical leadership and employee work engagement. Besides, power distance orientation mitigates the positive
relationship between ethical leadership and psychological empowerment as well as the indirect effect of
ethical leadership on employee work engagement via psychological empowerment.
Originality/value – This study contributes to the existing ethical leadership literature by identifying
psychological empowerment as an additional mediator and power distance orientation as a boundary
condition, in the relationship between ethical leadership and employee work engagement.
Keywords Work engagement, Psychological empowerment, Ethical leadership, Power distance orientation
Paper type Research paper

Introduction
High profile scandals across the world like Enron, WorldCom, Lehman Brothers, Sanlu Milk
have caused organizational researchers to study the ethical decision making and ethical
behavior of business leaders. Following these numerous scandals, companies are
anticipated to redress their ethical transgressions as well as to assume more social
responsibility and ethicality (Tu and Lu, 2016). Ethical leadership has been argued to be
important for organizations because of its positive effects on a variety of employees’
attitudes and behaviors, such as job satisfaction, voice, in-role performance, deviance,
organizational citizenship behavior, well-being, and creativity (Brown et al., 2005; Lindblom
et al., 2015; Chughtai et al., 2015; Piccolo et al., 2010; Walumbwa et al., 2011).
However, despite the intensive research on the positive effect of ethical leadership on
various employee attitudes and behaviors, to date employee work engagement as an
important indicator of work-related employee well-being (Chughtai and Buckley, 2011)
and organization performance (see Halbesleben, 2010 for review) has received little
attention (see exceptions for Chughtai et al., 2015; Demirtas, 2015), especially in
non-western economies. Resick et al. (2011) have suggested that ethical leadership may
have different meanings in different countries. It would be interesting and worthwhile to
investigate the effect of ethical leadership on employee work engagement in countries that
are different from Western culture such as Pakistan. More important, although prior
studies have suggested some mechanisms linking ethical leadership to employee work
engagement such as trust in leadership (Chughtai et al., 2015) and organizational justice Management Decision
(Demirtas, 2015), more efforts are still needed to deepen our understanding about the Vol. 56 No. 9, 2018
pp. 1991-2005
leadership-employee relations (Babalola et al., 2017; Neves and Story, 2015; Walumbwa © Emerald Publishing Limited
0025-1747
and Schaubroeck, 2009). DOI 10.1108/MD-02-2017-0107
 MD This study addresses this important issue by investigating the effect of ethical
56,9 leadership on employee work engagement, as well as the mediating role of psychological
empowerment and the moderating role of power distance orientation in this relationship, in
a totally different context against Western developed countries, that is, Pakistan. Following
prior studies, we first suggest that ethical leadership is positively associated with
subordinates’ work engagement (Chughtai et al., 2015; Demirtas, 2015). We believe, given
1992 the nature of ethical leadership, its effect on subordinates’ work engagement not only holds
in Western developed countries but also in other developing countries like Pakistan.
Moreover, we expect psychological empowerment to mediate the effect of ethical leadership
on employee work engagement. Ethical leaders offer psychological empowerment to their
followers (Spreitzer, 1995), that is, give sense of meaning to their work, provide them
autonomy and control over their job, offer constructive feedback to let them the feel of
competence, and highlight the impact of their tasks on attainments of goals (Piccolo et al.,
2010; Seibert et al., 2011; Tu and Lu, 2013; Zhu et al., 2004). The psychological empowerment
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in turn increases the followers’ positive energy and dedications toward their work
(Macsinga et al., 2015). In other words, employees (the followers) will be highly engaged in
their work (Markos and Sridevi, 2010; Saks, 2006) to reciprocate to their leader treatment.
We therefore suggest that ethical leadership enhances subordinates’ work engagement via
offering them psychological empowerment.
In addition, as a response to the call raised by Resick et al. (2011) to look into the different
meanings of ethical leadership in different cultures, we examine the boundary condition of a
key cultural value – power distance orientation – in the effect of ethical leadership on
employee work engagement via psychological empowerment. Prior studies have suggested
that employees with low power distance orientation are more likely to actively communicate
(Lian et al., 2012), and to build closer relationship, with the leader (Lian et al., 2012; Tyler
et al., 2000). As a result, employees with lower power distance orientation are more likely to
feel psychological empowerment than those with higher power distance orientation, given
the level of ethical leadership. We therefore propose that the effect of ethical leadership on
psychological empowerment and the effect of ethical leadership on work engagement via
psychological empowerment are to be weakened by employees’ power distance orientation.
This study contributes to the existing literature on ethical leadership in three aspects.
First, we explicate the underlying process of how ethical leadership works through
psychological empowerment to promote work engagement in subordinates. Second, the
current study enriches the existing research on ethical leadership by identifying the
contexts under which ethical leadership might have a different effect on employee-related
outcomes. Although previous studies show that subordinates’ power distance orientation
can influence their responses to leadership styles (Kirkman et al., 2009; Robert et al., 2000),
limited studies have examined how subordinates’ power distance orientation may influence
the effects of ethical leadership. Third, to date most of the existing studies on ethical
leadership have conducted in Western culture. With the sample from Pakistan, this study
would deepen our understanding of ethical leadership in different contexts.

Theory and hypotheses

Ethical leadership and work engagement
According to the dominant conceptualization, ethical leadership in organizations is defined
as “the demonstration of normatively appropriate conduct through personal actions
and interpersonal relationships, and the promotion of such conduct to followers through
two-way communication, reinforcement, and decision-making” (Brown et al., 2005, p. 120;
see Den Hartog, 2015 review for other perspectives). An ethical leader is a moral person and
a moral manager simultaneously. “Moral person” aspect of the ethical leader refers to the
personality characteristic and altruistic motivation characterized by honesty, integrity,
 and trustworthiness; while “Moral manager” component refers to making fair and balanced Ethical
decisions, express role expectations aligned with organizational goals and show sincere care leadership and
for followers. Ethical leaders are committed to behave ethically both in their personal and work
professional lives and do things based upon ethical decision rules. Ethical leadership
construct is found to be distant from the similar leadership constructs and accounts for engagement
incremental variance in employees’ different work and attitude-related outcomes (Ng and
Feldman, 2015). 1993
Work engagement is a positive motivational and psychological work-related state with
three dimensions: vigor, dedication, and absorption (Schaufeli et al., 2006). The element of
vigor refers to the willingness to put efforts in work. The dedication dimension refers to
significance, pride, enthusiasm, inspiration, and challenge from work, while absorption
captures the characteristics of being concentrated and complete engagement in work. Work
engagement stimulates motivation and also inspires positive emotions in employees toward
organization (Chen and Kao, 2012). Demirtas (2015) states that work engagement
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emphasizes on a high level of energy, involvement, and commitment. Engaged employees

are more enthusiastic about their work, more committed to their organization, and more
likely to focus on achieving personal and business goals (Brandebo et al., 2016).
Previous studies identified that when leaders treat employees fairly and respectably,
they reciprocate the leadership treatment by building social exchange relationship
(Blau, 1964; Brown et al., 2005). Ethical leadership is characterized as fair and trustworthy
(Brown et al., 2005), who treat subordinates fairly in rewards which motivate subordinates
to reciprocate with greater work engagement (Saks 2006). Further, ethical leadership
provides subordinates control over their job and chances for development through training
and support (Piccolo et al., 2010; Seibert et al., 2011), while the autonomy and development
opportunities are important drivers of work engagement (Markos and Sridevi, 2010).
Also, ethical leader through open and two-way communication and by encouraging
employees participation in decision-making makes clear the organizational goals and the
expected work-role from employees (Brown and Treviño, 2006; Piccolo et al., 2010), which
enhances their work engagement (Bhatnagar, 2012).
As a result, following prior studies (Chughtai et al., 2015; Demirtas, 2015), we expect a
positive effect of ethical leadership on employee work engagement:
H1. Ethical leadership is positively related with work engagement.

The mediating role of psychological empowerment

Although ethical leadership may have positive effect on subordinates’ work engagement, we
suggest this effect is via psychological empowerment. Psychological empowerment refers to
an intrinsic task motivation consisting of four-dimensional psychological state: meaning,
competence, self-determination, and impact (Spreitzer, 1995). Meaning dimension of
psychological empowerment refers to how important and worthwhile employees perceive
their job. Competence refers to an employee’s belief regarding his/her ability to complete a
task successfully. Self-determination refers to one’s sense of freedom to perform his/her job,
while impact represents a degree of freedom by which an individual can influence the
organizational outcomes in a positive way.
In this study, we argue that on the one hand, employees are likely to feel more
psychologically empowered under ethical leaders. Ethical leadership is argued to positively
affect the four-dimensional psychological state of psychological empowerment (Tu and Lu,
2013; Brown and Treviño, 2006; Zhu et al., 2004). For instance, ethical leader enhances
subordinates’ sense of meaningfulness about their work by demonstrating and
communicating ethical business values (Feng et al., 2016) and by highlighting the impact
of the tasks and efforts of subordinates on achieving group and organizational goals
 MD (Piccolo et al., 2010; Tu and Lu, 2013; Zhu et al., 2004). Ethical leader provides the
56,9 development opportunities to employees to accomplish their tasks well and channelize their
potential (Zhu et al., 2004), which in turn leads to enhance their competence (Tu and Lu,
2013). Also, ethical leaders provide constructive feedback to subordinates and such
self-efficacy information that enhances the subordinates’ feelings of competence (Bandura,
1997; Feng et al., 2016; Seibert et al., 2011). Finally, ethical leadership provides subordinates
1994 autonomy and control over their job which gives them the feelings of self-determination
(Piccolo et al., 2010; Spreitzer et al., 1997; Tu and Lu, 2013). In summary, ethical leadership
fosters employee’s sense of psychological empowerment.
On the other hand, psychological empowerment has been considered an important
motivational resource which enables employees to be extra engaged in their work (Ugwu
et al., 2014). Macsinga et al. (2015) argued that psychologically empowered subordinates
reciprocate with high energy to perform their tasks and show engagement in the work.
The meaningfulness of the work activity is argued to inspire employees to engage at work
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more (Bhatnagar, 2012; May et al., 2004). Likewise, when an individual believe that their
work is making difference and influence the organizational output, then they would feel
motivated to put more energy and dedication in their work (Stander and Rothmann, 2010).
Employees with high self-efficacy and competence were observed to be highly engaged and
inclined to exert more effort because such employees have much confidence on their abilities
(Chen, 2016). The empowered employees see themselves as more competent and therefore,
they exert more energy in their work and are more committed (Avolio et al., 2004).
To put together, we argue that ethical leadership will fosters employees’ psychological
empowerment, which in turn enhances their work engagement. Hence, we propose that:
H2. Psychological empowerment mediates the relationship between ethical leadership
and employee work engagement.

The moderating role of power distance orientation

Culture value orientations may serve as important facilitator or barrier to leadership
behaviors effects (Keller, 2006; Kirkman et al., 2009). According to Hofstede et al. (2010),
power distance orientation refers to the extent to which an individual accepts the unequal
distribution of power in an organization (Kirkman et al., 2009). It is an individual-level
variation in culture value relating to status, authority, and leadership behavior (cf. Loi et al.,
2012). Previous studies suggest that power distance orientation has a more direct
relationship with leadership reactions and cognitions than other culture values (Kirkman
et al., 2009; Loi et al., 2012; Chen et al., 2014). In this study, we suggest the relationship
between ethical leadership and psychological empowerment is moderated by subordinates’
power distance orientation.
Studies have shown that subordinates with higher levels of power distance orientation
respect more status difference show more deference towards the authority of the
organization and maintain greater social distance (Farh et al., 2007; Hofstede et al., 2010).
Employees with higher power distance orientation are more accustomed to autocratic
management style (Kirkman et al., 2009; Bialas 2009) and are more likely to accept authority
directions without question and avoid disagreement with leadership (Lam et al., 2002).
Moreover, employees with higher power distance orientation always look toward leaders for
directions and tasks completion strategies (Chen, et al., 2014) and prefer less communication
with authorities (Atwater et al., 2009; Loi et al., 2012).
In contrast, subordinates with low power distance orientation take active participation in
decision making and prefer active and frequent communication with the leader
(Lian et al., 2012). Moreover, subordinates with low levels of power distance orientation
develop a close relationship with their leader because they view leader approachable
 (Lian et al., 2012; Tyler et al., 2000). Ethical leadership promotes ethical standards, Ethical
procedural fairness, and two-way communication (Brown et al., 2005), as well as leadership and
participation in decision making (De Hoogh and Den Hartog, 2008). These promotions of work
ethical leadership fit well with low power distance orientation values of active and frequent
communications and participative in decision makings (Loi et al., 2012). Also, individuals engagement
with lower levels of power distance want more self-determination, control over the job and
frequent communication (Loi et al., 2012) and ethical leaders encourage these in 1995
organizations as we argued earlier. Thus, we propose that the relationship between ethical
leadership and psychological empowerment will be more positive for followers with lower
levels of power distance orientation. Hence, we propose:
H3. Power distance orientation moderates the relationship between ethical leadership
and psychological empowerment in such a way that the relationship is more positive
for employees with low power distance orientation than for employees with higher
power distance orientation.
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By combining H1-H3, we further propose a moderated mediation model, that is, power
distance orientation moderates the indirect effect of ethical leadership on work engagement
via psychological empowerment. Thus, we hypothesize:
H4. Power distance orientation moderates the indirect effect of ethical leadership on
work engagement via psychological empowerment such that the indirect effect is
more positive when power distance orientation is low than high.

Data and method

Participants and procedures
Our sample in this study consists of employees from the banking sector located in two main
cities (Islamabad and Peshawar) of Pakistan. The data were collected from the sub-branches
of the banks. In the banking sector in Pakistan, each sub-branch operates independently
under the supervision of branch manager with a standard operating team consists of
number of employees. This population of interest was selected for several reasons. First, the
financial crises especially in the banking sector in recent past raised the ethical expectations
(San-Jose et al., 2011), thus, make this sample suitable for ethical leadership study. Second,
the banking sector is characterized more stressful than other industry and less regularized
(Ruiz-Palomino et al., 2011; Wang et al., 2016), making this industry more relevant to
investigate the influence of ethical leadership on employee work engagement. Third,
banking sector in Pakistan represents more modern organizational outlook, having
employees with high qualification. Such participants might be more suitable to response
properly to study questions for having more clear understanding of the survey.
Access to the study participants was gained through personal and professional contacts
with managers by one of the authors. The author contacted with branch managers via
phone to explain the intent of the research and asked them for their supports. After getting
the approval, the questionnaires were distributed in the branches of bank by the author with
the help of branch managers to ensure the effectiveness of the survey. As English is the
official working language in Pakistan, therefore, no translation was needed. The data were
collected in two phases. A cover letter was attached with each questionnaire in both phases
to explain the purpose of the survey and to ensure anonymity and confidentiality.
The questions were designed to be simple and easy to facilitate comprehension and
explanations were provided in case of any difficulties in understanding. In the first phase,
participants were asked to rate their immediate supervisor ethical leadership and their own
psychological empowerment and power distance orientation. Of the 310 questionnaires
distributed to the participants, 270 completed responses were received. About three weeks
 MD later, the second round of data collection was done from those participants who completed
56,9 questionnaire in the first wave. They were asked to rate their work engagement. We applied
coding to match time-lag data.
A total of 251 valid questionnaires were returned with complete data from both surveys
(81 percent response rate). Among the respondents, 73 percent were male and 81 percent of
them were aged 34 years or below and their average tenure with the organization was
1996 5.57 years. Besides, 57 percent of them had master’s degree, 37 percent bachelor’s degree,
and 6 percent held associate and/or below qualification.

Measures
All measurement items used in this study were adopted from established scales. All
measures were assessed by five-points Likert scale (1 ¼ strongly disagree, 2 ¼ disagree,
3 ¼ neutral, 4 ¼ agree, 5 ¼ strongly agree) except control variables.
Ethical leadership. Ethical leadership was measured using “ten-item scale” developed by
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Brown et al. (2005). There are other measures developed for ethical leadership but ELS
developed by Brown et al. (2005) remain one of the most widely used measures (Bedi et al.,
2016). Sample item includes “My supervisor makes fair and balanced decisions.” The
ten-items scale reliability was 0.90.
Psychological empowerment. Psychological empowerment was measured by using
“12-items scale” developed by Spreitzer (1995), which consists of meaning, competence,
self-determination, and impact. Sample item includes “I have significant autonomy in
determining how I do my job.” The reliability of these 12 items was 0.80.
Work engagement. The “nine-item short Utrecht Work Engagement Scale” developed by
Schaufeli et al. (2006) was used to measure work engagement, which consists of vigor,
absorption, and dedication. Sample item includes “At my job, I feel strong and vigorous.”
The reliability of these nine items was 0.90 in this study.
Power distance orientation. We used the six-item scale from Dorfman and Howell (1988)
to measure power distance orientation. Sample question includes “Managers should make
most decisions without consulting subordinates.” The scale reliability was 0.76.
Control variables. We controlled for employees’ demographic characteristics such as
gender, education, age, and tenure an organization, as these variables may influence our
results in interest. The female was coded as 1 and male was coded as 2, education
(Associates ¼ 1, Bachelor ¼ 2, Master ¼ 3), age (1 ¼ 20-24, 2 ¼ 25-29, 3 ¼ 30-34, 4 ¼ 35-39,
5 ¼ 40 years old and above) and tenure (1 ¼ less than 1 year, 2 ¼ 1-5 years, 3 ¼ 6-10 years,
4 ¼ 11-15 years, 5 ¼ 16-20 years, 6 ¼ 20 years and above).

Analysis and results

Descriptive statistics
Mean, standard deviation, correlation, and reliabilities for all variables are presented in
Table I. The results indicate that ethical leadership is significantly and positively correlated
with psychological empowerment (r ¼ 0.62, p o0.01). Similarly, results show that ethical
leadership is positively correlated with work engagement (r ¼ 0.33, p o0.01). Furthermore,
results revealed that psychological empowerment is significantly correlated with work
engagement (r ¼ 0.33, p o0.01) and power distance orientation (r ¼ 0.48, po0.01).

Reliability and validity

Prior to testing our hypotheses, we conducted confirmatory factor analyses (CFAs) in
AMOS 20.0 to check the measurement model fitness. Scale items were used as indicators for
all constructs except for work engagement and psychological empowerment, where,
consistent with previous studies (Schaufeli et al., 2006; Spreitzer, 1995), the three dimensions
 of work engagement and four dimensions of psychological empowerment were used as a Ethical
construct indicators. We used multiple fit indices to assess the overall model fit, including leadership and
the root mean square error of approximation (RMSEA), comparative fit index (CFI), and work
incremental fit index (IFI).
Our baseline model is a four-factor model, includes ethical leadership, psychological engagement
empowerment, work engagement, and power distance orientation as presented in Table I. The
distinctiveness of the proposed model was tested by comparing our baseline model with 1997
different alternative models. Our proposed model showed good fit to the data: χ2 ¼ 494.07,
df ¼ 222, po0.001: CFI ¼ 0.91, IFI ¼ 0.91, TLI ¼ 0.90, and RMSEA ¼ 0.07 against the all
possible alternative model presented in Table II in details. All the factor loadings were
acceptable and significant. Moreover, there was a significant change in χ2 of baseline model and
all alternative models which indicate that respondents could distinguish the five constructs
very well. As shown in Table II, the hypothesis model was a better fit than all alternative fit,
thus provides evidence for discriminant validity. To establish convergent validity the
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acceptable cutoff for composite reliability (CR) is 0.60 and for average variance extracted (AVE)
is to exceed 0.50 for each construct (Bagozzi and Yi, 1988). The CR values were ranged from
0.80 to 0.90 and AVE for each construct exceeds 0.50 for all constructs. These indications
confirm the adequate convergent validity for our measurement model. Taken together, all these
results offer evidence for construct validity of the instruments used in this research.

Hypotheses testing
We used bootstrapping procedure to test our hypotheses, taking PROCESS for SPSS as
statistic tool (Hayes, 2009). The basic condition to establish mediation, as well as conditional
indirect effect, was that the bias-corrected bootstrap confidence intervals (CI) did not include
“zero” (Hayes, 2009). Moreover, we used 5,000 bootstrapping re-samples to compute
bias-corrected CI. Bootstrapping procedure has been shown in research one of the most
powerful and valid method for testing intervening effects and conditional indirect effects
(Hayes, 2009; Zhao et al., 2010).

Variables M SD 1 2 3 4 5 6 7 8

(1) Age 2.70 1.0 n/a

(2) Gender 1.75 0.43 0.32** n/a
(3) Education 2.52 0.60 −0.09 0.00 n/a
(4) Tenure in organization 5.91 7.1 0.74** 0.21** −0.14* n/a
(5) Ethical leadership 3.83 0.63 −0.17* 0.02 0.03 −0.23* (0.90)
(6) Psychological empowerment 3.74 0.44 −0.02 0.11 0.03 −0.01 0.62** (0.80) Table I.
(7) Work Engagement 3.79 0.66 0.03 0.11 0.06 0.00 0.33** 0.33** (0.90) Mean, standard
(8) Power distance orientation 3.53 0.66 −0.05 0.14* 0.05 −0.09 0.63** 0.48** 0.61** (0.76) deviations, reliability,
Notes: n ¼ 251. The reliability (Cronbach’s α) of construct is in the parentheses. *p o0.05; **po 0.01 and correlation

Models χ² df Δχ² CFI IFI TLI RMSEA

Four-factor model (baseline model) 494.07 222 – 0.91 0.91 0.90 0.07
Three-factor modela 687.99 227 193.92 0.85 0.85 0.83 0.09
Two-factor modelb 1,060.60 229 566.53 0.72 0.73 0.70 0.12 Table II.
One factor modelc 1,218.20 230 724.13 0.67 0.68 0.64 0.13 Results of CFAs:
Notes: aEthical leadership and psychological empowerment merged; bEthical leadership, psychological comparison of
empowerment and work engagement merged; cAll are merged in one factor measurement models
 MD Table III displays results for regression analysis provided by PROCESS. The results
56,9 indicate that ethical leadership is positively associated with employee work engagement
(β ¼ 0.36, p o0.001), offering support for H1. H2 predicted that psychological empowerment
mediates the relationship between ethical leadership and employee work engagement. The
indirect effect of ethical leadership on employee work engagement through psychological
empowerment was 0.12 and 95% CI for this indirect effect was (0.0105, 0.2300). Therefore,
1998 H2 is supported. To further validate this mediation effect, we also conducted Sobel test
(Sobel 1982). The results of Sobel test (z ¼ 2.36, p o0.05) provide further support for H2.
H3 postulated that power distance orientation moderated the relationship between
ethical leadership and psychological empowerment. The result in Table III (Model 4)
revealed that the interaction term between ethical leadership and power distance orientation
was significant and negatively associated with psychological empowerment (β ¼ −0.12,
p o0.01, 95% CI: (−0.2168, −0.0362)). The results suggest that power distance orientation
reduces the positive effect of ethical leadership on employee work engagement. To interpret
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the results more accurately, we plotted the statistically significant moderation of power
distance orientation for graphical depiction. As shown in Figure 1, at the low levels of power
distance, the relationship between the ethical leadership and psychological empowerment
was more positive. Therefore, H3 was confirmed.
H4 posited that power distance orientation moderated the indirect effect of ethical
leadership on employee work engagement via psychological empowerment. We followed
Hayes (2013) approach to test this moderated mediation relationship. The results for
moderation effect of power distance orientation in H3 provide confirmation for the
first-stage moderation in the moderated mediation analysis. To evaluate the significance of
indirect effect, we proceed to calculate the conditional indirect effect of ethical leadership on
employee work engagement via psychological empowerment. As in all three levels
(provided in Table IV ), the effect of ethical leadership on employee work engagement via
psychological empowerment was positive and significant, but the magnitude varies across
different levels of power distance orientation. The results in Table IV show that the
conditional indirect effect on employee work engagement through psychological
empowerment was weak for the moderator for 1 SD above the mean of power distance
orientation (β ¼ 0.05, p o0.001, 95% CI: (0.0112, 0.1507)), while this effect was strong for the
moderator 1 SD below the mean of power distance orientation (β ¼ 0.10, p o0.001, 95%
CI: (0.0126, 0.1974)). Therefore, H4 also received support.

Psychological Work Work Psychological

empowerment engagement engagement empowerment
Model 1 Model 2 Model 3 Model 4
β t β t β t β t

Age 0.038 1.23 0.022 0.390 0.012 0.21 0.038 1.23

Gender 0.068 1.27 0.123 1.27 0.105 1.08 0.036 0.690
Education 0.005 0.140 0.070 1.04 0.068 1.03 0.010 0.295
Tenure in Organization −0.002 −0.460 0.005 0.002 0.005 0.67 −0.001 −0.374
Ethical leadership 0.437*** 12.43 0.366*** 5.71 0.244** 3.01 0.295** 5.44
Psychological empowerment 0.278* 2.41
Power distance orientation 0.078 1.85
Ethical leadership × power distance −0.126** −2.75
orientation
Table III. F-value 33.37*** 7.50*** 7.34*** 26.42***
Results for R 0.636 0.364 0.392 0.657
2
mediation and R 0.405 0.123 153 0.432
moderation analysis Notes: n ¼ 251. *p o0.05; **p o0.01; ***p o0.001
 5 Ethical
4.5
leadership and
Psychological empowerment
work
4 engagement
3.5

3
1999
2.5
Figure 1.
2 Interaction plot of
Low PD ethical leadership and
power distance
1.5 High PD orientation on
psychological
1
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empowerment
Low Ethical leadership High Ethical leadership

Point estimate SE 95% LLCI 95% ULCI

Low PDO, EL-PE-WE 0.105 0.046 0.0126 0.1974

Table IV.
Medium PDO, EL-PE-WE 0.082 0.037 0.0175 0.1653 Conditional indirect
High PDO, EL-PE-WE 0.058 0.032 0.0112 0.1507 effects of EL on
Notes: n ¼ 251. PDO, power distance orientation; EL, ethical Leadership; PE, psychological empowerment; WE via PE at
WE, work engagement levels of PDO

Discussion
Ethical leadership has been suggested to influence employee and organizational outcomes.
However, research focusing on ethical leadership effects on employee work engagement is
limited (Chughtai et al., 2015; Demirtas, 2015). This study tests the assumption that when
employees are the recipients of the acts of ethical leader, they respond to this with higher
work engagement. Furthermore, this study examines the mediating role of psychological
empowerment in the relationship between ethical leadership and employee work
engagement. In addition, this study tests for the moderating role of power distance
orientation on the relationship between ethical leadership and psychological empowerment.
Results revealed that ethical leadership has the positive main effect on employee work
engagement and psychological empowerment acts as a mediator in the relationship between
ethical leadership and employee work engagement. Further, for low power distance
orientation, the ethical leadership and psychological empowerment relationship is stronger
as compared to high power distance orientation. Also, the effect of ethical leadership on
employee work engagement through psychological empowerment is moderated by power
distance orientation. The findings of the study provide several theoretical and practical
implications which are discussed below.

Theoretical implications
Findings of our study suggest several theoretical implications for ethical leadership
literature. First, by examining the mediating role of psychological empowerment in the
ethical leadership-work engagement link, our study contributes to better understanding of
the underlying mechanism through which ethical leadership relates to employee work
engagement. The findings of our study identify that leaders boost the employees feeling of
 MD psychological empowerment by exhibiting ethical leadership behaviors, which ultimately
56,9 leads to enhanced work engagement in them. Our findings confirm the existing evidence
which suggested that employee psychological empowerment serves as an important
motivational resource which enables employees to be extra engaged in their work (Ugwu
et al., 2014; Macsinga et al., 2015). Moreover, examining employee psychological
empowerment as a mediator helps us better understand that how and why ethical
2000 leadership can enhance employee work engagement.
Second, this study recognizes employees’ power distance orientation as an important
contingent factor which affects the effect of ethical leadership on employees’ psychological
empowerment. Prior studies have suggested that cultural factors may impact the
effectiveness of ethical leadership (Kirkman et al., 2009). We provide evidence for this
speculation by revealing that employee power distance moderated the relationship between
ethical leadership and psychological empowerment such that the relationship is stronger for
followers with low power distance orientation than high. Our study results suggest that
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leaders and follower’s cultural dimensions should be taken into consideration to better
understanding the factors that can influence follower’s outcomes.
Additionally, this study was conducted in a developing nation “Pakistan.” To date, very
few empirical studies have examined ethical leadership behavior and its effects on employee
outcomes in developing countries such as Pakistan. Pakistan is a collectivistic society,
facing different political and economic issues; resultantly establishing a unique environment
for this study. Interestingly, the results from this study posit that ethical leadership can be
effective in organizations within a country having such a unique environment. These
findings show that ethical leadership can be beneficial across different cultures.

Practical implications
Our study has important implications for managers too. First, our study confirmed
that ethical leadership is effective in enhancing employees work engagement, which
suggests that ethical leadership role is critical in providing an environment in which
employees feel more encouraged to engage in their work. Second, as this
study demonstrates that ethical leadership has the indirect effect on employee
outcomes through the mediator psychological empowerment, therefore, it is proposed
that organization and leaders should create conditions through which they can enhance
employees’ perceptions of psychological empowerment. Given that, we recommend that
organizations can design empowerment intervention programs to help the employees
exhibit their maximum potential (Ugwu et al., 2014). Third, as mentioned earlier individual
cultural difference can play an important role and our findings for power distance
orientation also support this, therefore, cultural differences would be worthwhile to
consider the effectiveness of leadership behavior. Fourth, as ethical leadership has
positive impacts on employee outcomes, therefore, organizations need to promote ethical
behaviors both in supervisors and subordinates. For example, organizations can
select and develop leaders who give importance to ethical conducts in his vision. The
organizations can also invest in management training programs that emphasize on both
leaders’ and followers’ ethical behavior (Babalola et al., 2018; Walumbwa et al., 2011).
Another possible way to promote ethical behavior in the organization can be through
making it part of the in-role job requirement. When the display of such behaviors is
formally rewardable or punishable, employees (both leaders and subordinates) will feel
more obligated to perform them. In short, though having ethical leadership in
organizations is not an easy task (see Den Hartog, 2015 review on ethical leadership to
know more about the topic), organizations need to educate employees, especially higher
leadership and supervisors about the importance of ethical behavior in the organization to
get positive organizational outcomes.
 Limitations and future research Ethical
This study also has some limitations and should be considered while interpreting its leadership and
findings. First, data were collected from one source and self-reported. Though, we took work
measures to avoid possible common method bias, like data were collected in two phases
(Podsakoff et al., 2003). However, we measure ethical leadership and psychological engagement
empowerment at the same time. It is desirable to collect data of the mediator and the
independent variables at different time points. Second, supervisor and subordinates share 2001
close relations, which may cause self-report bias. This may be avoided by the random
selection process and/or data about ethical leadership can be collected from other sources
like ethical leaders’ supervisors or peers. Another potential limitation would be the
generalizability of our findings. Our sample in this study was measured in one country
“Pakistan” and from single industry “banking” which may restrict the generalizability of
our results to other organizations in other cultural contexts. Future studies can validate our
findings with multi-industry and cross-cultural samples.
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Corresponding author
Yongqiang Gao can be contacted at: yqgao@hust.edu.cn
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