EMPLOYEE ENGAGEMENT IN SMES: TRANSPARENCY, AUDIT & JUSTICE WITH TRANSFORMATIONAL LEADERSHIP AS A MODERATOR

Abstract

This study investigates that how the financial transparency, internal audit effectiveness, and organizational justice influence employee engagement in small & medium-sized enterprises (SMEs). It further examines moderating role of transformational leadership. A quantitative, cross-sectional survey was conducted among 380 employees and managers from textile and glass SMEs in Faisalabad, Pakistan. Data were collected using validated 5-point Likert scales. The proposed model was analyzed using structural equation modeling (SEM) with moderation testing. The results reveal that financial transparency, internal audit effectiveness, and organizational justice each significantly enhance employee engagement. Moreover, transformational leadership moderates the relationships, indicating that governance, audit, and fairness practices are more strongly linked to engagement when employees perceive their leaders as inspirational, motivating, as well as supportive. This study develops fit multidisciplinary model linking finance, auditing, along with the ethics to employee engagement, while identifying leadership style as boundary condition. Thus, it provides novel insights for SMEs in emerging economies seeking to strengthen workforce commitment and productivity.