  This paper assesses the role of financial performance in explaining firms'
investment dynamics in the wine industry from the three European Union (EU)
largest producers. The wine sector deserves special attention to investigate
firms' investment behavior given the high competition imposed by the
latecomers. More precisely, we investigate how the capitalization, liquidity
and profitability influence the investment dynamics using firm-level data from
the wine industry from France (331 firms), Italy (335) firms and Spain (442)
firms. We use data from 2007 to 2014, drawing a comparison between these
countries, and relying on difference-and system-GMM estimators. Specifically,
the impact of profitability is positive and significant, while the
capitalization has a significant and negative impact on the investment dynamics
only in France and Spain. The influence of the liquidity ratio is negative and
significant only in the case of Spain. Therefore, we notice different
investment strategies for wine companies located in the largest producer
countries. It appears that these findings are in general robust to different
specifications of liquidity and profitability ratios, and to the different
estimators we use.
