The Leadership styles (Laissez-faire leadership, Transformational leadership, and Transactional leadership) are studied in Pakistan’s textile spinning sector to determine the most effective leadership style for enhancing employees’ performance using psychological capital as a mediator. The PLS-SEM model, LMX through LC Analysis, and the Measurement Model are run twice through SEM to examine the data. The results reveal that the psychological capital has a balancing effect on both leadership style and workforce output. There is a big difference between transformational leadership and laissez-faire leadership regarding employee performance. As a result of the addition of psychological capital as a moderator, transactional leadership has an insignificant but considerable effect on employee performance. The research provides a guideline to academic researchers for further study in other sectors of textile industries, and investors can make better decisions to invest in the textiles spinning sector.

Keywords: Leadership Styles, Positive Psychological Capital, PLS-SEM Model, LMX Theory, Measurement Model.

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