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

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.