Cooperative Strategy and Liquidation in the Bordeaux Wine Industry

Julien Cadot and Adeline Alonso Ugaglia

No 205743, 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California from Agricultural and Applied Economics Association

Abstract: Cross and Buccola (2004) established that if the lenders of cooperatives are not in position to assess the “right” price to be paid for the raw-material delivered by cooperative members, these latter may push for a cash transfer which may deteriorate the financial position of the cooperative. This form of liquidation can be an exit way for cooperatives which, at the turning point of maturity, do not seek strategic alliances to increase their market power, or do not shift to a new model, according to the lifecycle approach of Cook (1995). In this research, we test this hypothesis for cooperatives of the Bordeaux wine industry. We run two regression which aim at characterizing the relationship between leverage and cash transfer to cooperative members according to the downstream strategy of cooperatives. Our results confirm our main hypothesis. The cooperatives which stay in the traditional form are prone to liquidation: the cash transfer to producers implies a higher leverage which implies a financial distress. The financial behavior of cooperatives forming union and of those which have opted for vertical integration is radically different.

Keywords: Agribusiness; Financial Economics; Industrial Organization (search for similar items in EconPapers)
Pages: 12
Date: 2015-05-27
New Economics Papers: this item is included in nep-cse and nep-hme
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea15:205743

DOI: 10.22004/ag.econ.205743

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