THE MEDIATING ROLE OF GOOD GOVERNANCE IN THE RELATIONSHIP BETWEEN STRATEGIC LEADERSHIP AND LOCAL FINANCIAL PERFORMANCE: A PATH ANALYSIS OF ALGERIAN MUNICIPALITIES

Abstract

This study investigates the complex interplay between strategic leadership and financial performance in Algerian local governments, with a specific focus on the mediating role of good governance. Utilizing Upper Echelons Theory and Agency Theory as a conceptual framework, the research examines how leadership vision translates into fiscal sustainability. Data were collected via a stratified random sample of 200 senior and mid-level managers across 57 municipalities in Algiers. Using Partial Least Squares Structural Equation Modeling (PLS-SEM), the findings reveal a full mediation effect; strategic leadership significantly impacts financial performance only through the mechanisms of good governance (transparency and accountability), while its direct effect remains non-significant. The model explains 66.4% of the variance in local financial performance, suggesting that institutionalizing governance is a prerequisite for effective local leadership in the Algerian context.