Solutions to Corporate Governance in Improving the Existing Business Model in Luckin Coffee

Research Article
Open access

Solutions to Corporate Governance in Improving the Existing Business Model in Luckin Coffee

Ze Zhu 1*
  • 1 Binghamton University    
  • *corresponding author zzhu61@binghamton.edu
Published on 13 September 2023 | https://doi.org/10.54254/2754-1169/10/20230473
AEMPS Vol.10
ISSN (Print): 2754-1177
ISSN (Online): 2754-1169
ISBN (Print): 978-1-915371-47-8
ISBN (Online): 978-1-915371-48-5

Abstract

Luckin Coffee has dedicated to becoming a leading coffee brand in China but has kept a negative profitability growth rate for years before it was delisted and has lost stockholders’ faith in it. There are corporate governance issues within the company. Through the “variable interest entity” or “VIE” structures, Luckin obtained billions of dollars from US investors, but giving no equity shares in actual operation. However, two years after the delisting, Luckin Coffee obtained a new boom in national profitability inland. This paper aims to analyze what the organizational issue is for Luckin Coffee and how it should solve the problem within a corporate governance context. Both quantitative method and comparative analysis are used to compare Luckin Coffee with other competitor such as Starbucks. The research conclusion is that an improved VIE structure is needed for both Luckin Coffee and other Chinese companies that go listing overseas, and more attention needs to be paid to the method of corporate governance instead of financial performance.

Keywords:

Luckin Coffee, corporate governance, VIE structure, delisting

Zhu,Z. (2023). Solutions to Corporate Governance in Improving the Existing Business Model in Luckin Coffee. Advances in Economics, Management and Political Sciences,10,238-243.
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References

[1]. Daily, I. B.: Luckin Coffee Tries To Clean House Amid New Evidence In Fraud Probe. Investor’s Business Daily (2020).

[2]. Xi, C., Huang, Y.: Are U.S.-Listed Chinese Firms a Minefield? A Board Perspective. Papers (2021). https://ssrn.com/abstract=3841843.

[3]. Peng, Z., Yang, Y., Wu, R.: The Luckin Coffee scandal and short selling attacks. Journal of Behavioral and Experimental Finance (34), 100629 (2022). https://doi.org/10.1016/j.jbef.2022.100629｡

[4]. Cao, Q.: Empirical Study on Financial Fraud of Luckin Coffee. IEEE Xplore (2020). https://doi.org/10.1109/ICEMME51517.2020.00184.

[5]. Wei, S.: Analysis of Marketing Innovation Under the New Retail Mode-Taking “Luckin coffee” as an Example. E3S Web of Conferences (235), 01074 (2021). https://doi.org/10.1051/e3sconf/202123501074.

[6]. Guan, W., Lu, S.: Exploring the Causes and Countermeasures of the Disorder of Internal Control of Enterprises with Money-burning Marketing Model--Take Ruixing Coffee’s Financial Fraud as an Example. Frontiers in Economics and Management (2021). https://doi.org/DOI: 10.6981/FEM.202108_2(8).0047.

[7]. Kumar, N., Mittal, S. M., Chu, S. E.: Starbucks in China: An undisputed leader? (2020). https://cmp.smu.edu.sg/ami/article/20200603/starbucks-china-undisputed-leader.

[8]. Muddy Waters: Luckin Coffee: Fraud + Fundamentally Broken Business (2020). https://cdn.gmtresearch.com/public-ckfinder/Short-sellers/Unknown%20author/Luckin%20Coffee_Anonymous.pdf.

[9]. Reuters: Nestle to pay $7.15 billion to Starbucks to jump-start coffee business. CNBC (2018). https://www.cnbc.com/2018/05/07/nestle-to-pay-7-point-15-billion-to-starbucks-in-coffee-tie-up.html.

[10]. Gu, Z., Qi, B., Zhao, Y.: Why Luckin Coffee Survived After Its Scandal? Proceedings of the 2021 3rd International Conference on Economic Management and Cultural Industry (ICEMCI 2021). https://doi.org/10.2991/assehr.k.211209.410.

[11]. Titanium Media.: Starbucks China’s Revenue Falls 40% in Fiscal Q3_the_coffee_sales (2022). www.sohu.com. https://www.sohu.com/a/574283683_116132.

Cite this article

Zhu,Z. (2023). Solutions to Corporate Governance in Improving the Existing Business Model in Luckin Coffee. Advances in Economics, Management and Political Sciences,10,238-243.

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About volume

Volume title: Proceedings of the 2nd International Conference on Business and Policy Studies

ISBN：978-1-915371-47-8(Print) / 978-1-915371-48-5(Online)
Editor：Javier Cifuentes-Faura, Canh Thien Dang
Conference website: https://2023.confbps.org/
Conference date: 26 February 2023
Series: Advances in Economics, Management and Political Sciences
Volume number: Vol.10
ISSN：2754-1169(Print) / 2754-1177(Online)

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References

[1]. Daily, I. B.: Luckin Coffee Tries To Clean House Amid New Evidence In Fraud Probe. Investor’s Business Daily (2020).

[2]. Xi, C., Huang, Y.: Are U.S.-Listed Chinese Firms a Minefield? A Board Perspective. Papers (2021). https://ssrn.com/abstract=3841843.

[3]. Peng, Z., Yang, Y., Wu, R.: The Luckin Coffee scandal and short selling attacks. Journal of Behavioral and Experimental Finance (34), 100629 (2022). https://doi.org/10.1016/j.jbef.2022.100629｡

[4]. Cao, Q.: Empirical Study on Financial Fraud of Luckin Coffee. IEEE Xplore (2020). https://doi.org/10.1109/ICEMME51517.2020.00184.

[5]. Wei, S.: Analysis of Marketing Innovation Under the New Retail Mode-Taking “Luckin coffee” as an Example. E3S Web of Conferences (235), 01074 (2021). https://doi.org/10.1051/e3sconf/202123501074.

[6]. Guan, W., Lu, S.: Exploring the Causes and Countermeasures of the Disorder of Internal Control of Enterprises with Money-burning Marketing Model--Take Ruixing Coffee’s Financial Fraud as an Example. Frontiers in Economics and Management (2021). https://doi.org/DOI: 10.6981/FEM.202108_2(8).0047.

[7]. Kumar, N., Mittal, S. M., Chu, S. E.: Starbucks in China: An undisputed leader? (2020). https://cmp.smu.edu.sg/ami/article/20200603/starbucks-china-undisputed-leader.

[8]. Muddy Waters: Luckin Coffee: Fraud + Fundamentally Broken Business (2020). https://cdn.gmtresearch.com/public-ckfinder/Short-sellers/Unknown%20author/Luckin%20Coffee_Anonymous.pdf.

[9]. Reuters: Nestle to pay $7.15 billion to Starbucks to jump-start coffee business. CNBC (2018). https://www.cnbc.com/2018/05/07/nestle-to-pay-7-point-15-billion-to-starbucks-in-coffee-tie-up.html.

[10]. Gu, Z., Qi, B., Zhao, Y.: Why Luckin Coffee Survived After Its Scandal? Proceedings of the 2021 3rd International Conference on Economic Management and Cultural Industry (ICEMCI 2021). https://doi.org/10.2991/assehr.k.211209.410.

[11]. Titanium Media.: Starbucks China’s Revenue Falls 40% in Fiscal Q3_the_coffee_sales (2022). www.sohu.com. https://www.sohu.com/a/574283683_116132.

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