In examining therelationship between contractual governance, relational governance on family firmfinancial performance, scholars Boateng, Wen, & Brew (2015) have investigateda study from a survey of 2432 management and non-management employees offamily businesses across China and Ghana. The study was confirming four main hypotheses,whether the level of contractual complexity has or has no effect on individualand ultimately family firm financial performance as well the level ofrelational governance does or does not influence individual and family firm financialperformance. In order to find out the reliability of these hypothesis they haveemployed both qualitative and quantitative methods in sampling.
Hence, thestudy aimed at finding the effect of relational and contractual governance on afamily firm’s financial, they have permitted the use of considering financial performanceas the dependent variable, where they used returns on asset (ROA) measurementto analyze the family firm’s overall performance. Instead, study’s objectives permittedthe use of corporate governance or contractual and relational governance whererelational governance viewed as a composite factor with three fundamental normsnamely, open communication and sharing information, trust and cooperation. Inorder to examine how all these variables are related and whether therelationship is same for all family businesses and industries investigatorshave adopted some control variables that is firm size, type of industry, andthe age of the family business. In examining the relationship between contractual governance, relationalgovernance and performance, a positive relation was resulted as well open communicationsharing of information, trust represented positive links with the performance.
Age of business firm size were also positively correlated however none of thecontrol variables had any significant relationship with any of the othermeasured variables. Under contractual complexity, they resulted a negativelinear relationship between cooperation among family member employees on individualfirm performance. Further, there was a significant positive relationshipbetween open communication and ROA as well as between trust and ROA. Accordingto Chinese non family member employees’ responses, all the analyzes under cooperation,open communication information sharing and trust showed a positive relationshipwith ROA or the performance based on the Chinese management responses,dimensions of relational governance which is trust and information sharerepresent a positive relationship with ROA while cooperation represent a negativeconnection with ROA. When it comes to the situation of the Ghanaian family firms,according to Ghanaian family member employees’ responses, trust and informationsharing, cooperation reflects a positive relationship with the performance, onthe other hand under Ghanaian management responses all the dimension ofrelational governance showed a positive links with the performance.