Title: The horizon problem in Bordeaux wine cooperatives

Authors: Julien Cadot; Adeline Alonso Ugaglia; Bernard Bonnefous; Bernard Del'homme

Addresses: ISG Paris, 147 Avenue Victor Hugo, 75116 Paris, France ' Bordeaux Sciences Agro, Scientific Institute for Vine and Wine, University of Bordeaux, ISVV, 1, cours du Général de Gaulle, CS40201, 33175 Gradignan cedex, France ' Bordeaux Sciences Agro, Scientific Institute for Vine and Wine, University of Bordeaux, ISVV, 1, cours du Général de Gaulle, CS40201, 33175 Gradignan cedex, France ' Bordeaux Sciences Agro, Scientific Institute for Vine and Wine, University of Bordeaux, ISVV, 1, cours du Général de Gaulle, CS40201, 33175 Gradignan cedex, France

Abstract: This paper explores if and how the horizon problem affects wine cooperatives according to the downstream strategy they are following: remaining in their traditional form, i.e., as bulk wine providers to negociants; forming a union with other cooperatives; or vertical integration. We identify three variables, each of which should have a different influence on the price paid to producers when the horizon problem prevails or not: cooperative margin, asset obsolescence and leverage. We observe that 'traditional' cooperatives prioritise the payment to producers against the renewal of assets, while cooperatives in union seem to anticipate the need for investment by a decrease of the price paid to producers when the capital obsolescence reaches a certain level, confirming our main hypothesis. However, the other results have led us to reconsider our assumptions and to question the access to bank credits for such wine cooperatives.

Keywords: horizon problem; France; wine industry; financial constraints; investment; Bordeaux; wine cooperatives; bulk wine providers; cooperative unions; vertical integration; cooperative margin; asset obsolescence; leverage; capital obsolescence; bank credit.

DOI: 10.1504/IJESB.2016.079976

International Journal of Entrepreneurship and Small Business, 2016 Vol.29 No.4, pp.651 - 668

Available online: 11 Oct 2016 *

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