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With the rapid growth of the domestic lending industry, assessing whether the borrower of each loan is at risk of default is a pressing issue for financial institutions. Although there are some models that can handle such problems well, there are still some shortcomings in some aspects. The purpose of this paper is to improve the accuracy of credit assessment models.

In this paper, three different stages are used to improve the classification performance of LSTM, so that financial institutions can more accurately identify borrowers at risk of default. The first approach is to use the K-Means-SMOTE algorithm to eliminate the imbalance within the class. In the second step, ResNet is used for feature extraction, and then two-layer LSTM is used for learning to strengthen the ability of neural networks to mine and utilize deep information. Finally, the model performance is improved by using the IDWPSO algorithm for optimization when debugging the neural network.

On two unbalanced datasets (category ratios of 700:1 and 3:1 respectively), the multi-stage improved model was compared with ten other models using accuracy, precision, specificity, recall, G-measure, F-measure and the nonparametric Wilcoxon test. It was demonstrated that the multi-stage improved model showed a more significant advantage in evaluating the imbalanced credit dataset.

In this paper, the parameters of the ResNet-LSTM hybrid neural network, which can fully mine and utilize the deep information, are tuned by an innovative intelligent optimization algorithm to strengthen the classification performance of the model.

The case describes the fall of Eskom, which in 2001 was named the Financial Times’ Power Company of the Year, but by 2019 was suffering from “systemic corruption, malfeasance, fraud and state capture” that had “compromised the credibility of the organisation and eroded investor confidence”. Eskom’s incompetent management lays the ground for reasonable doubt as to whether the force majeure notice was indeed irresistible. The case suggests several methods available in financial markets to hedge risk – but to what extent are these relevant and appropriate? The main objective of the case, however, is to examine and assess the criteria required to claim force majeure. Two aspects are questionable: Was the virus unforeseeable and was it irresistible? Eskom is “bleeding” R².5m per month because of significantly reduced electricity demand, and while it clearly benefits Eskom to break their supply contract, the consequences for Exxaro are far more dire. And, if carried to conclusion, how would such actions impact the entire economy?

In April 2020 South Africa’s stated-owned electricity utility Eskom sent a pre-cautionary force-majeure notification to Exxaro Limited’s Grootegeluk Coal Mine. The notification, citing COVID-19 as an unforeseeable, external and irresistible event, would have disastrous consequences for the mine’s 25 m tonnes pa coal contract to supply Eskom’s Medupi power station. Not only was the legality of the force-majeure questionable, it was unethical, and not in the spirit of President Ramaposa’s call to businesses to continue paying contractors. The case briefly describes Eskom’s troubled history following South Africa’s 1994 democratic election. It examines the force majeure clause common in contracts, and questions whether COVID-19 meets the criteria of an “unforeseeable, external and irresistible” event.

MBA and Executive Education

Teaching Notes are available for educators only.

CSS 7: Management Science.

The case illustrates the application of the prospect theory to risk-seeking investor behavior. It also provides an example that standard valuation methods such as discount cash flow), discount divided model and price multiples are not always applicable to value a stock. The students are exposed to a real situation where investors turn risk-seeking. The case offers insights into why irrational investors are attracted to risky assets and their probable socio-demographics.

This case illustrates a case when investors become risk-seeking and how the prospect theory explains the investors’ risk appetite. Energy Earth PCL is a coal importer and distributor incorporated in Thailand. Its shares had been suspended for trading before the Stock Exchange of Thailand allowed temporary trading in July 2019. A series of unfavorable events leading up to the temporary trading period suggest that the company’s financial health was severely distressed. Its book value was presumably negative and its going concern was threatened. However, investors still bought the shares with the hope of hitting the jackpot. The case presents an example of the psychological aspects of humans when investing in a stock market. With an application of the prospect theory, irrational risk-seeking behavior explains the motivation to invest in risky stocks.

Introductory finance course.

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CSS: 1 Accounting and Finance.

The case intends to achieve the following objectives with the audience: Apply the knowledge of fundamental analysis to select good companies for investment; analyse companies for investment through the contrarian strategy; and appreciate the need of own research before investing.

This case study provides an insight into the general process around investment for a retail investor. The protagonist of the case, Rajdeep Sharma, is a middle-class, salaried IT consultant from India. He has taken inspiration from Rakesh Jhunjhunwala, a renowned investor in India, and started his journey on the road to generate wealth. He decides to adopt the contrarian strategy and identifies Jaiprakash Associates Limited (JPA) to invest his savings. JPA is a large conglomerate with decades of experience, which has diversified business across multiple sectors. However, JPA’s pursuit of growth and expansion has created financial issues because of a large amount of debt it has amassed over the past few years. The company has been unable to repay its interest and principal obligations to the debt holders, making it consider a restructuring plan to meet these responsibilities. Meanwhile, Rajdeep has been optimistic about his investments but must experience excessive turmoil due to the high volatility in the company’s share prices. The case highlights the value of sound analysis, along with the impact of information on retail investors’ decision-making process. It will help prospective investors appreciate the importance of economic, sectoral and financial statement analysis before making any investments.

Fundamental analysis for MBA students majoring in Finance.

Teaching notes are available for educators only.

CSS 1: Accounting and Finance.

The learning outcomes of this paper are as follows: to understand the language of accounting, to interpret financial statements to understand beyond what’s reported and to predict the financial health of a company before it is too late.

The case revolves around the Indian coffee retail giant - Café Coffee Day (hereafter, CCD). Coffee Day Global Limited of which CCD is a part, is the largest producer of Arabica beans in India. The case goes on to discuss the life and profile of VG Siddhartha (hereafter, VGS), whose leadership and farsightedness made coffee a household name in India, traditionally a tea-drinking country. Within just a year or two after its Initial Public Offering in November 2015, the company’s financial and legal troubles began to surface. The worst blow came when VGS, the 60-year-old founder and CEO committed suicide on July 29, 2019. His group’s mounting debt and impending doom had propelled him to take his own life. Today, the future of CCD remains hanging in the balance, with creditors ready and willing to take the firm into bankruptcy.

Under-graduates and above.

Teaching notes are available for educators only.

CSS 1: Accounting and Finance.

Finance, General Business Management.

Postgraduate/MBA Second Year.

The university-owned Universal Computing Limited (UCL) was contemplating on the future of its internet services business. Internally, the internet services department had put up a proposal on how to revamp the business. Concurrently, UCL received a joint venture proposition from a foreign telecommunication entity with which it had some business relation. The proposal was for UCL to cede its internet services department and the associated licence to the venture while the partner will finance the venture. Professor Ben Msomi, the UCL’s Managing Director knew that he had to make one of the two proposals a good sell to the board of directors’ meeting in two-weeks’ time probably before suggesting UCL to exit the internet services business.

Overall, the case aims at gaining an understanding of the sources of value of business and valuation of business. Specifically students are expected to learn how to: evaluate of the effect of various courses of action on the value of a business; apply different valuation methods – balance sheet, discounted cash-flows and market multiples in different context; establish appropriate rate for capitalization in business valuation; and handle assumptions and risks in business valuation,

Overall, the case aims at gaining an understanding of the sources of value of business and valuation of business. Specifically students are expected to learn how to: evaluate of the effect of various courses of action on the value of a business; apply different valuation methods – balance sheet, discounted cash-flows and market multiples in different context; establish appropriate rate for capitalization in business valuation; and handle assumptions and risks in business valuation,

Teaching notes are available for educators only. Please contact your library to gain login details or email support@emeraldinsight.com to request teaching notes.

CSS 1: Accounting and Finance

The case, while acknowledging the difficulty of managing a family business in view of the accompanying human issues, emphasizes that sound business practices and procedures, and clarity with regard to the goal, remain the key; a firm is a complex, interconnected system and management needs a systems viewpoint; and technology can only support underlying business processes if there is clarity with respect to these.

SomPack had survived low-cost Asian competition starting the mid-1990s, a revolt by some extended family to try and bring it down with the help of a competitor, the Turkish banking crisis of 2001, and the global economic crisis of 2008 all the while watching its suppliers, competitors and customers collapse. A focus on cost-cutting and internal discipline by the successor, who had been promoted to CEO in 2004, had exacerbated internal discontent somewhat and had led to issues with production planning, but everyone understood that times were tough. Several large customers who had left were asked to return because the alternatives had been worse. By 2012, SomPack was considering expansion into new products in collaboration with its international partners. Then one day, in July 2013, it suddenly collapsed. Could the entire approach have been wrong? What should management have done instead?

Undergraduate, graduate business management.

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CSS 7: Management Science.

This case focuses on the business rescue of South African Airlines. SAA, four times rated the best airline in Africa (SAA, 2019), was already insolvent when in early 2020 COVID-19 decimated the world. The state-owned airline, which had last made profits in 2011, continued to lose millions of passengers to competitors over the next decade and, despite bailouts of more than R40bn, entered Business Rescue in December 2019, still owing creditors more than R26bn. To the surprise of many, Public Enterprises minister Pravin Gordhan was determined to rescue the airline. In May 2021, the business rescue practitioners handed SAA back to the interim board and Thomas Kgokolo (CA) (MBA) was appointed interim CEO. In June 2021, Gordhan announced a “born again” SAA, “almost ready to take off” and promised no more bailouts. But, with several billion rand outstanding to complete the rescue plan, a grounded fleet, unresolved labour problems, an critical but unnamed “strategic-equity partner” and a largely unvaccinated country entering its third COVID wave – what were the chances?

Within the framework of a country desperately in need of jobs and short of capital, the case raises questions about ethics, accountability, responsibility, management, economics and strategy. Should retrenched workers in airlines feel the consequences of their unfortunate career choices? Ought government’s bail-out already failed industries? Should governments run airlines? What sources of funds are available? Have all the necessary requirements for “restructuring” to succeed been satisfied?

Teaching notes are available for educators only.

CSS 11: Strategy.

MBA, Exec-ed.

The learning outcome of this paper is to understand the geopolitical aspects of international business. Assessing the political risk inherent in international investment projects. Maintaining a favorable corporate image in the host country despite apparent hostilities. Analyzing the risks associated with doing business in an emerging market.

In February 2019, local newspapers in the Maldives published unconfirmed reports that the Indian company GMR was reinvesting in the Maldives. GMR had secured a contract in 2010 for renovation/expansion of The Maldives International Airport. However, the contract created political turmoil, with opposition parties objecting to some clauses. People considered GMR closer to the incumbent President, Mohammed Nasheed. The unstable political scenario forced President Nasheed to resign amidst allegations of corruption. The new President showed hostility toward India and GMR while making overtures to China. He canceled the airport contract and awarded it to a Chinese company. GMR went to the international Tribunal in Singapore. The tribunal upheld the Maldivian government’s right to terminate the agreement but awarded GMR a compensation of US$270m. In 2019, a new government came to power in the Maldives, with Mohammed Nasheed enjoying a commanding position. The government pledged to accept the judgment of the Singapore International Tribunal. The local media discussed the possibility of the return of GMR to the Maldives after seeing some senior GMR officials in the Maldives. However, it was not clear whether it would be a good idea for GMR.

Master's level program.

Teaching notes are available for educators only.

CCS 11: Strategy.

The purpose of this paper is to apply survival analysis, using Cox proportional hazards regression (CPHR), to the problem of predicting if and when supply chain (SC) customers or suppliers might file a petition for bankruptcy so that proactive steps may be taken to avoid a SC disruption.

CPHR is first compared to multiple discriminant analysis (MDA) and logistic regression (LR) to assess its suitability and accuracy to SC applications using three years of financial quarterly data for 69 non-bankrupt and 74 bankrupt organizations. A k-means clustering approach is then applied to the survival curves of all 143 organizations to explore heuristics for predicting the timing of bankruptcy petitions.

CPHR makes bankruptcy predictions at least as accurately as MDA and LR. The survival function also provides valuable information on when bankruptcy might occur. This information allows SC members to be prioritized into three groups: financially healthy companies of no immediate risk, companies with imminent risk of bankruptcy and companies with intermediate levels of risk that need monitoring.

The current paper proposes a new analytical approach to scanning and assessing the financial risk of SC members (suppliers or customers). Traditional models are able to predict if but not when a financial failure will occur. Lacking this information, it is impossible for SC managers to prioritize risk mitigation activities. A simple decision rule is developed to guide SC managers in setting these priorities.