The Role of Financial Literacy in Mediating the Influence of Virtuous Leadership on the Welfare of MSME Employees

Abstract

This study aims to analyze the influence of virtuous leadership on financial literacy and the welfare of MSME employees, as well as test the role of financial literacy as a mediator in this relationship. The study uses a quantitative approach with a survey method of MSME employees in Balikpapan City. Data analysis was conducted using Partial Least Squares–Structural Equation Modeling (PLS-SEM). The results of the study show that virtuous leadership has a positive and significant effect on employee financial literacy. On the other hand, financial literacy does not have a significant effect on employee welfare. Virtuous leadership has a positive and significant effect on employee welfare. Furthermore, financial literacy is unable to mediate the influence of virtuous leadership on employee welfare. These findings show that virtuous leadership is a more dominant factor in improving the welfare of MSME employees, while financial literacy plays a more prominent role in improving employees' financial capabilities. This research provides implications for MSME actors and MSME support institutions to strengthen the implementation of ethical leadership and increase financial literacy capacity as part of human resource development.