Zhengbaiwen Case

zhengbaiwen
case
Zhengbaiwen events
Since 1996 Zhengbaiwen set about establishing a

nationwide marketing network, in the absence of a
feasibility study of the case, built more than 40
branches with the large-scale investment of a billion
dollars, the final allotment of funds in 1998 and 126
million yuan also finished ahead of schedule to
spend. ... ... The company, where sales of 100
million yuan to complete, could enjoy the treatment
like group vice president, a self-purchased cars.
Begins with 2 billion yuan in sales Zhengbaiwen
soaring all the way to 7 billion Just in one year ;
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At the same time, only the purchase of
transport costs as high as 10,000,000
yuan. For the completion indicator, the
use of buying and selling prices at all
branches upside down approach, a
large number of high-low commodity,
creating a vicious cycle. Since 1999,
effective asset of Zhengzhou Baiwen
Co., Ltd. is less than 6 billion, while
losses over $ 1.5 billion, besides
zhengzhou baiwen owed $ 2.5 billion
to bank.
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Glorious past
Zhengbaiwen is the first listed companies in Zhengzhou ,
Henan , mainly operating store wholesale.
April 1996 China Securities Regulatory Commission
approved the listing period.
1986-1996, sales grew 45-fold and profit increase of 36
times.
Shanghai Stock Exchange in 1996.
1996 full year earnings per share is 0.37 yuan, an increase
of 42.31% over the previous year, sales revenue increased
150.79%, sales revenue is 4.1 billion.
Triangle Credit Sales
Construction Bank 、 the Changhong Group and
zhengbaiwen carried out a so-called iron triangle of trade
- to come forward acceptance Construction Bank, Bank of
the promissory notes issued by Sichuan Changhong,
Changhong Zhengbaiwen buy products, and credit to the
downstream retailers or wholesalers way supply.
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From prosperity to decline
Zhengbaiwen listing smash hit, as the reform of the local business
community bright star and the lead in establishing a modern
enterprise system typical.
Frequent visits at all levels of leadership, various honor after
another. Henan provincial authorities put it as a commercial
enterprise to learn from. Company leaders also have access to the
national model, a series of National Excellent Entrepreneur award.
Net loss per share in 1998 and 1999 Zhengbaiwen 2.54,4.844 yuan,
hit a record at the time, it declared the previous year profit of 0.448
yuan per share. March 3, 2000, China Cinda Asset Management
Company court in Zhengzhou City, "Zhengbaiwen" application for
bankruptcy, which is China's first stock market listed company
bankruptcy, then the letter of the debt principal and interest owed
under the name ST Zhengbaiwen Total 2.13021 billion yuan.
April 26, 1999 Announcement: Due to the company's most recent
fiscal year audit results show that the net assets of less than par
value per share, 27, began to implement special handling, stock
quotes on price limits of 5%, the stock referred to as the
"Zhengzhou Baiwen "to" ST Zhengbaiwen. "
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　 1996 1997 1998 1999 2000
Net assets
2.34 2.25 0.2214 -6.5766 -6.7557
per share
Earnings per
0.37 0.448 -2.54 -4.84 -0.2381
share
1999 annual report: diluted earnings per share of $

-4.8435, -6.5766 yuan per share, net assets, another loss
of the Shanghai and Shenzhen stock.
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The fact of accounting irregularities in Zhengbaiwen
1, before and after listing through the virtual mention the rebate,
less charges, inflated by means of inter-period profit recorded
Page  7
2 allotment of funds does not match the use and
disclosure
April 1998 Zhengbaiwen instructions in placement, the
commitment to 126 million yuan into the construction of
30 products distribution center. July that year the actual
allotment 155 million, a 0.4% remaining (600 million) for
the merger of Zhengzhou City, chemical raw materials,
the remaining funds are used to repay bank loans.
3 material omissions listing announcement

Subsidiaries and business divisions indicating
the preparation of false financial statements and
annual report prior to listing, there are 22 in
total operations of foreign subsidiaries financial
statements are not imported stock company,
after listing a total of 23
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Facts and analysis of failure
1) a very imperfect corporate governance structure: SAC in

Zhengzhou, the largest shareholder hold 14.64%, while the
other top 10 shareholders hold 26 percent, the largest
shareholder will be classified as equity and Zhengbaiwen
business (to give up oversight) . Listed more than 200 million
of funds raised lending, misappropriation of the results has
not yet, in 1998 with the allotment of $ 100 million investment
in building sales networks. Board of Supervisors, without any
objection to the shareholders.
2) management concept confusion: 1998 Annual

Report also acknowledged: weight management,
light management; heavy goods sales, light
business strategy; heavy capital management,
financial risk prevention light; re-building of
network hardware, network software, perfect light;
re-introduction of talents, light staff supervision
and training.
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3) Decision-making at random: In 1992 to 6.8 million yuan in
Zhengzhou Italian shoe company shares, but has not
produced. Without feasibility study, it has invested heavily in
more than 40 branches located. In 1998, in the case of
financial constraints, on the allotment of funds 600 million
merger has nothing to do with the main chemical raw material
plant in Zhengzhou, only three companies merged to produce
undetermined investment losses 2,869,700.
4) personnel mismanagement: in order to
stimulate employees to sales targets, targets
were labeled vice president to complete, can be
customized with the car. The results of the
outlets selling price at purchase upside down, a
large number of high-low commodity, leaving
more than 400 million accounts receivable has
not recovered, but as a branch manager,he has
BMW, live in a mansion.
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Zhengbaiwen Case

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Zhengbaiwen Case

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zhengbaiwen

Since 1996 Zhengbaiwen set about establishing a

1999 annual report: diluted earnings per share of $

3 material omissions listing announcement

1) a very imperfect corporate governance structure: SAC in

2) management concept confusion: 1998 Annual

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