Contractual relations: An agency theory interpretation from a managerial point of view


China-USA Business Review, vol.9, no.1, pp.53-64, 2010 (Peer-Reviewed Journal)

  • Publication Type: Article / Article
  • Volume: 9 Issue: 1
  • Publication Date: 2010
  • Journal Name: China-USA Business Review
  • Page Numbers: pp.53-64
  • Istanbul University Affiliated: Yes


This study examines the contractual relationships from a managerial point of view in a sample of 55 family firms in an industrial zone in Turkey. The results show that the contract type (i.e. behavior or outcome-based) is not affected with a professional manager’s tenure, position and his/her education level. It is also presented that the contract type does empirically not have a relationship with information asymmetry and risk taking/uncertainty in a family firm setting. Furthermore, its relationship to goal conflict and job complexity is weak and negative, which necessarily means any increase in goal conflict or job complexity requires an outcome-based contract to be written between an owner and a professional manager. Yet, only goal conflict is significant in explaining the contract type. From the managerial perspective, these findings imply that that the agency theory is not suitable for family firms.