Abstract:
The business researchers are interested in identifying what leadership styles result in
positive outcomes in organizations. From the work of the researchers, many theories
and approaches have been developed time to time. This paper provides a literature
review of transformational and transactional leadership styles and its impact on
employee performance. The review outlines the major leadership theories and
provides a framework for understanding the body of knowledge. Transformational
and transactional leadership theories are discussed in detail in order to provide a
specific leadership theoretical framework for this study. Empirical findings related to
the study variables are discussed based on the literature. The review of literature
shows that the leaders are perceived effective when they use transformational and
transactional leadership styles together. Further several studies identified that,
compared to transactional leadership, transformational leadership has more impact
on employee performance. However, there is a gap in the current literature examining
the effects of transformational and transactional leadership styles on employee
performance in the Sri Lankan context. The review results would bring a platform for
the future researchers to concentrate on the applicability of the theory in various
sectors in Sri Lanka.
