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Case Study

Parmalat S.p.A.: An impressive milking system

By Stewart Hamilton and Ivan Moss

35 pages

October 2004

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Reference: IMD-1-0215

In December 2003 Parmalat SpA collapsed into unexpected bankruptcy. Its off-balance sheet debts were later revealed to total €14.3 billion, and it was discovered that it had allegedly been falsifying its accounts and profits for a period of over 10 years. This case details the history of the company and Calisto Tanzi, the entrepreneur who founded it. It also describes the development to date of Parmalat’s “Extraordinary Administration”, the restructuring of the company under the Italian equivalent of “Chapter 11” insolvency. The immediate case issue is how Parmalat disguised its financial problems for so long. Examining this allows several broader issues to be explored, including: 1) when and why Parmalat’s financial problems started; 2) how far Parmalat’s strategy contributed to its problems; 3) the impact changing external environments (political and economic) had on Parmalat’s problems; 4) the effect of Parmalat’s history and origins as a family company on the way it managed its problems; 5) how such large accounting mis-statements could be perpetrated; 6) how those mis-statements could go undetected by investors, bankers and regulators; 7) what red flags and warning signals could have alerted outsiders to Parmalat’s problems.

Keywords

Corporate Collapse, Insolvency, Fraud, Corporate Governance, Dairy

Settings

World/global, Italy
December 2003

Type

Published Sources

Available Languages

English

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