The Fall of D'Long
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Please note:
This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Case Details: |
Price: |
| Case Code |
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BENV009 |
For delivery in electronic format: Rs. 300;
For delivery through courier (within India): Rs. 300 + Rs. 25 for Shipping & Handling Charges
ThemesCorporate Scams |
| Case Length |
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13 Pages |
| Period |
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1996-2007 |
| Pub Date |
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2007 |
| Teaching Note |
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Not Available |
| Organization |
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D' Long Group |
| Industry |
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Diversified
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| Countries
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China |
Abstract:
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The case discusses the rise and fall of China based D'Long Group (D'Long). The
group was started by Tang brothers in Xinjiang as a small facility to develop
and print photographs. D'Long grew by acquiring companies involved in different
businesses ranging from tomato paste to automobile parts. Since there were
limited options available to obtain finance for its rapidly growing businesses
in China, D'Long began acquiring shares in the state-owned enterprises. D'Long
then procured bank loans by using the shares of its listed companies as
collateral. The group went on to establish itself in financial services business
by establishing NBFCs and acquiring stake in City Commercial Banks.
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D'Long obtained more hg funds by issuing right
shares and providing debt guarantees. Funds obtained from
different sources like trust companies and finance companies
were used for buying its own shares, in order to increase the
share price.
The investigations by China Banking Regulatory Commission in
2003 placed D'Long among high-risk companies, after which banks
refused to extend any more loans to it. In April 2004, D'Long
announced that it was facing major financial problems due to
adverse macro-economic conditions and fall in share prices of
its listed companies. This announcement led to further fall in
share prices and demand from the banks for higher collateral.
D'Long failed to meet its financial and business obligations and
failed to repay its depositors, which led to its collapse.
Issues:
» Examine the reasons for initial success of D'Long
» Critically evaluate the factors that led to the collapse of D'Long
» Analyze the methods used by private companies to obtain funds for financing
business in China
» Gain insights in the functioning of banking industry and capital markets in
China
Contents:
Keywords:
D'Long Group, Stock Scandal, Bankruptcy, Financial Problems,
Chinese Banking Industry, Financing Private Businesses , Transparency,
Collateral Securities, Debt Guarantees, Diversification, Business Expansion,
Corporate Governance Structure, Chinese Securities Regulatory Commission,
Capital Market Financing in China, Asset Management
The Fall of D'Long
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