LAUSR

Abstract Based on conservation of resource theory, this study proposes that a psychological contract breach influences psychological contract violation and forgiveness, which in turn lead to customer-directed deviance. Moreover, this study investigates the moderating role of organizational ethical climate, which is influenced by ethical leadership, in these relationships. It also examines the moderating role of breach magnitude and breach attribution in the relationship between psychological contract breaches and violations, and analyzes the moderating role of organizational apology and the role of organizational compensation in the relationship between psychological contract breaches and forgiveness. Study 1 involved a multi-level structural equation modeling analysis using a matched sample consisting of data from 84 managers, 512 frontline employees, and 512 customers drawn from 84 travel agencies. Study 2 collected data from 176 manager-customer dyads. Hypothesis testing results indicate that most of hypotheses are supported.