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Luckin Coffee: The Impact of Financial Fraud on Company Value -- Research on Capital Market Reactions and Reputation Rebuilding
- 1 Lingnan University
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Abstract
In recent decades, China has developed increasingly close ties with global capital markets through continuous "bringing in" and "going out." On October 9, 1992, Brilliance Auto (NYSE: CBA) became the first "China-concept stock" to be listed in the U.S. In the following decades, waves of Chinese companies chose to list on NASDAQ, accelerating China’s integration into global capital markets. In 2020, Luckin Coffee’s financial fraud was exposed, quickly making the company a target of widespread criticism and driving its stock price to rock bottom. The resulting trust crisis not only affected Luckin but also impacted many other China-concept stocks. Although the storm has gradually subsided, the impact of financial fraud on a company’s value and the process of recovery remains an important topic for exploration. This paper uses Luckin Coffee as a case study, combining case and data analysis to examine the impact of financial fraud on a company in the capital markets and the arduous path of restructuring and self-rescue that Luckin undertook to recover. It serves as a significant warning for today's corporate managers of publicly listed companies. This paper finds that Luckin Coffee's financial fraud severely impacted its stock price and reputation, but through restructuring and strategic adjustments, the company demonstrated significant resilience. The study offers valuable insights into the recovery process for companies facing similar crises.
Keywords
Financial fraud, Share price, Capital market, Corporate reputation, China-concept stocks
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Cite this article
Zhang,B. (2024). Luckin Coffee: The Impact of Financial Fraud on Company Value -- Research on Capital Market Reactions and Reputation Rebuilding. Advances in Economics, Management and Political Sciences,136,81-87.
Data availability
The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.
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Volume title: Proceedings of the 3rd International Conference on Financial Technology and Business Analysis
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