Nowadays the leadership topic is a major challenge for today’s organizations. Based on the leadership literature in Malaysia [1-3], it shows that research on the leadership topic is not a wide phenomenon in Malaysia as it is in Western countries. However, to improve the understanding of leadership performs in Malaysia some challenges made by local and international academic researchers to address the importance of leadership in Malaysia context. Furthermore, those literatures show that very little attempt conducted to examine leaders concerning ethical leadership and effectiveness behavior adopted in Malaysia context [4]. According to Hazlina, Azlan [5] and Madanchian, Hussein [4], there is lack of studies on ethical leadership issues among small firms in Malaysia and to date, work on ethics has been largely concentrated on large firms [6-8]. Therefore, there is an increasing awareness about ethical leadership among SMEs in Malaysia, thereby leading societies to object firms that are found to be ethically ill and irresponsible. Therefore, the main focus of this study is to find the impact of ethical leadership on leadership effectiveness among SMEs in Malaysia context. Specifically, this study examines the relationships between ethical leadership and leadership effectiveness.

۲٫ Role of SMEs in Malaysia

Through the establishment of the National SME Development Council (NSDC) in 2004, the importance of SMEs as the main engine growth of the country’s economy was recognized [9, 10]. There is no doubt of the SMEs’ contribution to the country growth and economy development which is a crucial feature of economic growth in Malaysia [10-13]. In 2010, SMEs represented about 99.2% of total business establishments and contributed 39.1% of the country’s GDP. SMEs provided 59.5% of total employment and contributed 28.4% to the exports of the country in 2010 (NSDC 2015). One of the main purpose of the Eleven Malaysian Plan (11MP) for the period 2015 to 2020 is to organize and equip SMEs in the country with the required capability and capacity to meet the challenges of an increasingly competitive business environment [14].