A multi-level theoretical framework is proposed in this study, within which we identify transformational leadership behavior as the primary source of the positive influence on service performance through the underlying mechanism of leader-member exchange (LMX). The data for this study are obtained from 23 branches of a large commercial bank in Taiwan, with the samples collected from both managers and employees forming 228 manager-employee dyads, and thereby avoiding common method variance. Our results reveal that both transformational leadership and LMX have
significantly positive effects on service performance, with the LMX relationship also playing a mediating role between transformational leadership and service performance. Of further considerable interest is our finding that group cohesiveness appears to be an important moderator enhancing the relationship between transformational leadership and service performance, as well as LMX and service performance. We conclude with a discussion of the theoretical and practical implications of our findings.