INTRODUCTION In this era of cut-throat competition, organizations are making every effort to improve or maintain their performance. Scholars and practitioners have asserted human resource as the most important organizational resource and a key to achieve high performance and competitive advantage over competitors (Delaney & Huselid, 1996; Pfeffer, 1994). A lot of studies have demonstrated the relationship of HR practices with higher frm performance (e.g., Bello-Pintado, 2015; Huselid, 1995; Kundu & Gehalawat, 2016a). It has also been proved that HR practices have effect on organizational outcomes by affecting employees’ attitudes and behaviors (Kundu & Gahlawat, 2016b; Wood & Wall, 2007). Many researchers and practitioners have admitted the importance of employee job attitudes such as job satisfaction, organizational commitment, psychological empowerment, and organizational citizenship behavior for higher frm performance (Kirkman & Rosen, 1999; Steyrer, Schiffnger, & Lang, 2008). If employees feel psychologically attached and identify themselves with the organization then they surely will contribute to its performance (Gong, Law, Chang, & Xin, 2009). In the words of Munjuri and K’Obonyo (2015), “An empowered workforce that has the relevant knowledge, skills and competencies can produce exemplary organizational results.” A lot of studies have proved the direct effect of psychological empowerment on frm performance (Berraies, Chahaer, & Yahia, 2014; Fernandez & Moldogaziev, 2013; Peccei & Rosenthal, 2001). But there is a lack of studies that uncovers the mechanism through which psychological empowerment affects frm performance. Psychological empowerment in itself makes employees psychologically capable to perform their jobs well, whether employees will use this psychological empowerment to contribute to frm performance depends on their commitment to the organization. Effectively committed employees provide valuable and inimitable resource to the organization that provides it competitive advantage over its competitors and also enhance performance of the organization (Gong, et al., 2009). There is no study available till date, which has studied the constructs of psychological empowerment, affective commitment and frm performance together. This study flls this gap by taking affective commitment as a mediator between psychological empowerment and the frm performance. The present study seeks to meet few objectives. First, we examine the level of psychological empowerment EFFECTS OF PSYCHOLOGICAL EMPOWERMENT ON FIRM’S PERFORMANCE: MEDIATION OF AFFECTIVE COMMITMENT Subhash C. Kundu*, Sandeep Kumar** * Professor, Haryana School of Business, Guru Jambheshwar University of Science and Technology, Hisar, Haryana, India. Email: sckundu@yahoo.com ** Research Scholar, Haryana School of Business, Guru Jambheshwar University of Science and Technology, Hisar, Haryana, India. Email: sandeephsb10@yahoo.com Article can be accessed online at http://www.publishingindia.com Abstract The purpose of this study is to investigate the effect of psychological empowerment on frm performance by taking the employee affective commitment as mediator. Primary data based on 208 respondents has been analyzed to test the stated hypotheses. Initially exploratory factor analysis has been employed to clarify the underlying pattern of factors. Then correlation and multiple regression analyses have been used to check the relationship among study variables. Results of regression analysis revealed that affective commitment partially mediates the relationship between psychological empowerment and frm performance. So, to enhance affective commitment and frm performance, management and leaders must do every possible effort to empower their employees. The implications for HR practitioners and organizations are also discussed. Keywords: Psychological Empowerment, Affective Commitment, Firm’s Performance, India