Impact of Psychological Wellbeing of Business Leaders on Organizational Outcomes – A Systematic Review

Abstract

The psychological well–being of business leaders has evolved as a crucial yet underexamined factor influencing business achievements in the complicated, volatile, and dynamic global corporate world. The psychological endurance of leaders impacts national economic performance, innovation potential, and workforce stability, particularly in crises and periods of uncertainty. Despite the increased focus on employee mental health, the impact of business leaders’ psychological well–being (PWB) on corporate performance remains inadequately examined. This study provides a novel contribution to the existing knowledge in this context by assessing the influence of mediating and moderating factors on the relationship between psychological wellness of business leaders and key business outcomes, including strategic decision-making, financial performance, and innovation, as well as examining how various leadership styles influence in this relationship. Additionally, although there is an emphasis on psychological competence and emotional intelligence in leadership theories such as transformational and servant leaderships, there is currently insufficient evidence linking leaders’ emotional well–being to critical business performance indicators. The objective of this study is to critically synthesize the available literature on the relationship between leaders’ psychological well-being and the performance of companies and assess the mechanisms and context-specific elements that influence the relationship. The methodology used in this study is a systematic literature review using a sample of 60 articles published from 2000 to 2024 in this context. The results emphasize consistent theoretical and empirical evidence supporting the positive effects of leaders’ psychological well–being on the effectiveness of strategic decision-making, financial outcomes, innovations, and overall organizational success. Essential mediating factors like organizational climate, leader–member exchanges (LMX), and psychological capital alongside moderating factors including organizational culture, leadership styles, and organizational support systems are recognized as critical for comprehending this dynamic. This paper offers insights for business leaders and policymakers to prioritize leadership development and training programs that emphasize the psychological well-being of business leaders and establish effective organizational support systems to assist leaders to have better emotional resilience, which leads to high performance outcomes. Finally, the paper provides insights for future scholars to conduct more longitudinal studies to assess the long–term impact of psychological well–being on business performance and conduct context specific research covering high–stressed industries.

     Keywords: psychological well-being, organizational performance, business leadership, mental health of leaders, leadership effectiveness