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Agency costs, vertical integration and ownership structure: the case of wine business in France

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  • Cadot, Julien

Abstract

French Wine Business raises specific questions on organizational forms. Indeed, the pervasiveness of specific organizational forms such as family-controlled firms and cooperatives and the diversity of vertical integration strategies stress the question of agency costs and their effects on performance. In this paper, we use the Ang, Cole and Lin (2000) methodology to measure agency costs according to governance structure and vertical integration on a sample of 180 wine firms. The econometric analysis displays highly significant results which let think that (i) family-controlled firms may be subject to agency problems partly solved by the “outside equity” discipline, (ii) agency costs are not significantly higher for cooperative firms than for family-controlled firms, (iii) operating expenses increase with vertical integration for non-cooperative firms. One striking result is that contrary to non-cooperative firms, performance does not increase with vertical integration for cooperatives while agency costs remain low albeit vertical integration. One explanation is that agency costs may be seen as necessary expenses for success of vertical integration and cooperatives may not fill this requirement.

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  • Cadot, Julien, 2013. "Agency costs, vertical integration and ownership structure: the case of wine business in France," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149677, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea13:149677
    DOI: 10.22004/ag.econ.149677
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    1. Fleming, Grant & Heaney, Richard & McCosker, Rochelle, 2005. "Agency costs and ownership structure in Australia," Pacific-Basin Finance Journal, Elsevier, vol. 13(1), pages 29-52, January.
    2. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    3. James S. Ang & Rebel A. Cole & James Wuh Lin, 2000. "Agency Costs and Ownership Structure," Journal of Finance, American Finance Association, vol. 55(1), pages 81-106, February.
    4. George Hendrikse & Jos Bijman, 2002. "Ownership Structure in Agrifood Chains: The Marketing Cooperative," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(1), pages 104-119.
    5. Chrisostomos Florackis & Aydin Ozkan, 2009. "The Impact of Managerial Entrenchment on Agency Costs: An Empirical Investigation Using UK Panel Data," European Financial Management, European Financial Management Association, vol. 15(3), pages 497-528, June.
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