On May 8th, 2012, the president of Hefei Xingtai Financial Holding Group (Xingtai) received a message from a senior official of the Hefei Municipal Government, the company's authorizing body, asking that Xingtai supply financial support to PanTeng Company (PanTeng), a solar power manufacturing company. In order to live, PanTeng needed Xingtai to provide a guarantee for an JPY100 million business loan from a commercial bank.
PanTeng had been turned down by Xingtai Financing Guaranty, one of the subsidiary companies in Xingtai, due to the possibly high level of guarantee threat. If Xingtai supplied a guarantee, it may be liable to reimburse the loan due to PanTeng's high-risk operation, lose its risk management expertise, and confront further violations. Nonetheless, denying the senior officer's request would hamper the important relationship with the local government in Xingtai. Should Xingtai approve the loan and take a chance, or should it deny the guarantee? Jiuchang Wei is affiliated with University of Technology and Science China. Lei Zhou is affiliated with University of Technology and Science.
PUBLICATION DATE: January 14, 2016 PRODUCT #: W16008-HCB-ENG
This is just an excerpt. This case is about STRATEGY & EXECUTION
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