The impact of mental health, emotional intelligence and corporate strategy on managerial performance of SMEs during and post-COVID-19 pandemic

Purpose This study aims to investigate the effect of mental health on managers’ performance of small and medium-sized enterprises (SMEs) in an emerging market called Iran both during and after the COVID-19 pandemic. Moreover, this paper also examines the mediating role of corporate strategy between mental health and managerial performance. Third, this study wanted to find out if emotional intelligence (EI) moderates the relationship between them. Design/methodology/approach The questionnaire tool is used to measure our variables including mental health, EI, corporate strategy and managerial performance. The authors collected the data from 384 managers in SMEs. To analyze the data, the study employs structural equation modeling with a partial least squares method while incorporating Random Forest, the Sobel Z-test and multi-gross analysis to evaluate the differences between pandemic and post-pandemic periods. Findings Consistent with the upper echelons theory, the results show that there is a positive and significant relationship between mental health and SME managerial performance, which is mediated by corporate strategy. In other words, improved mental well-being enables SME managers to thoroughly analyze various aspects and contingencies, including the organizational structure, the economic climate of the country and internal capabilities and challenges, so they can adopt a fitting strategy leading to the economic prosperity of the company. Notably, the postcrisis performance was most strongly predicted by corporate strategy which also dealt with the prolonged impact of the pandemic further intensified by ongoing sanctions. Moreover, the findings confirm the moderating impact of EI on the relationship between mental health and managers’ performance. This implies that managers with high EI maintain an optimistic approach to tackling challenges, perceiving them as opportunities rather than stressors, thereby being better equipped to make informed decisions during difficult circumstances. In short, this study finds that SME managers in Iran face substantial psychological strain due to ongoing economic instability driven by sanctions, inflation and political uncertainty. The necessity for good mental health and high EI will still be essential for managerial performance after the pandemic ends. Practical implications The research offers a strong admonishment to SME board members to focus more on their managers’ mental health and EI during challenging market times to be able to protect financial resources and keep a company’s value. The paper adds that SMEs can learn some specific ways to foster the mental health of their managers which will lead to better decision-making and leadership ability and increase organizational productivity. Originality/value Whereas most previous studies focused on the employee’s mental health, to the best of the authors’ knowledge, this paper is one of the first to focus on the CEO mental health as a determinant of performance in an emerging market experiencing the greatest stressors, addressing the research gap at the level of managers. Finally, the study contributes a thorough comprehension of how the relationship is in general affected by the moderating effects of EI and the mediating effect of corporate strategy.