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

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.