The Role of Transformational Leadership in Improving Financial Performance of Small and Medium Enterprises in Ardabil Province

The present study aimed to explain the role of transformational leadership in improving the financial performance of small and medium enterprises (SMEs) in Ardabil Province. This research is applied in terms of purpose and descriptive-survey of correlational type in terms of nature. The statistical population included all managers of SMEs active in Ardabil Province, totaling 850 individuals, from which 265 were selected using stratified random sampling based on Cochran's formula. Data collection tools consisted of two standard questionnaires: the Multifactor Leadership Questionnaire (MLQ) by Bass and Avolio (1994) for measuring transformational leadership, and the Financial Performance Questionnaire by Richard et al. (2009). The validity of the instruments was confirmed through content and construct validity, and reliability was established using Cronbach's alpha coefficient (0.91 for transformational leadership and 0.88 for financial performance). Descriptive findings indicated that the mean scores of transformational leadership (3.85) and financial performance (3.52) were at relatively favorable levels. Inferential findings revealed a positive and significant relationship between transformational leadership and financial performance (r = 0.62). Stepwise regression results showed that three dimensions—intellectual stimulation, inspirational motivation, and idealized influence—had the greatest roles in predicting financial performance, respectively, collectively explaining 44% of the variance in financial performance (adjusted R² = 0.44), while the individualized consideration dimension showed no significant effect. Based on the findings, it is recommended that managers and policymakers take effective steps toward improving the financial performance of SMEs in Ardabil Province by designing training programs to enhance intellectual stimulation and inspirational motivation among managers, and by redesigning performance evaluation systems based on innovation and visioning indicators.