Zhaoming (Richard) Shi

Job Market Paper

"The Macro Implications of Trade Credit Delay" (with Jing Wu)   

About a quarter of trade-credit obligations are paid late, and larger buyers pay later than comparable smaller buyers in the same industry and quarter. Using granular Dun & Bradstreet data on realized payment behavior, we show that this delay is selective: larger firms delay a greater share of supplier relationships, but not a greater share of dollars, and the invoices they delay are disproportionately small. We build and estimate a structural model in which downstream firms source from two tiers of suppliers: critical inputs, which are always paid on time, and many small, relationship-specific suppliers whose payments can be deferred. Firms choose how much of the marginal bill to pay upfront, trading the working-capital benefit of delay against the risk of losing an exit-prone supplier. Estimated by the simulated method of moments, the model implies that mandating prompt payment—as in the EU's revised Late Payment Directive—raises firms' upfront financing needs by about 25% and induces firms to substitute toward cash hoarding. Input use falls by 3–4%and output by 2.9–4.1%, with larger contractions when borrowing constraints are tight.  Payment delay, therefore, acts as an endogenous supplier-financing margin: restricting it can reshape corporate liquidity management and contract real activity.

Work in Progress

"Expand or Harvest? Alternating Innovation and Parity-Dependent Pricing in Durable Goods" (with Roman Kapuscinski, Yuan Ma, Chaoyu Zhang)

In durable technology markets, firms often rely on sequential innovation and upgrade pricing to generate repeat purchases, but strategic consumers may delay adoption and alter the evolution of demand over time. We study a durable-goods monopolist’s optimal launch and pricing strategy in a continuous-time model with at most two active product generations, where the firm sets both retail and upgrade prices and consumers decide whether to adopt, upgrade, or wait. We show that the optimal policy converges to an alternating steady state: launches with larger quality improvements emphasize new-customer acquisition, while smaller improvements primarily monetize the installed base through upgrades. We characterize the evolution of market segmentation and identifies conditions under which parity-dependent launch and pricing cycles outperform stationary policies.

"Equity Based Compensation and Financial Friction" (with Yi Zhou)

How does equity-based compensation (EBC) shape the transmission of financial frictions to firm investment and growth? We combine firm-level evidence from the 2007 credit shock with a quantitative heterogeneous-firm model. Empirically, higher pre-crisis EBC attenuates the post-shock decline in investment by 12.7%. To explain this finding, we develop a model in which financially constrained firms endogenously choose cash-equity compensation contracts for risk-averse workers. By reducing firms’ upfront cash needs, EBC relaxes working-capital constraints and preserves financing for employment and investment. Quantitatively, EBC reduces the probability of being credit-constrained from 39.1 to 7.0% and raises mean output by approximately 23% relative to cash-only compensation.

"Loan Misallocation in an Emerging Economy" (with Athiwat Thoopthong)

In Thailand, the five largest commercial banks control over 70% of banking sector assets and commercial loans. Large market power leads to a great markup from the benchmark rate. We use Thai administrative loan-level data to document heterogeneity in borrowing cost faced by firms that is not explained by firm fundamentals or standard collateral constraints. Then, we build a structural model that bridges the misallocation literature and bank market power to quantify the welfare implications of banking market concentration.

"The Effect of Course Scheduling on Academic Performance under High-Stakes Education" (with Jun Li, Yuan Ma)

Students face an exogenously imposed course schedule in K-12 education. Yet ample evidence suggests that educational outcomes differ by class time. Collaborating with high schools in China, we first measured the performance disparity attributable to course scheduling using historical course schedules and exam grades. Then, we conduct an RCT to pin down the treatment effect of course scheduling on academic performance and derive optimal scheduling principles.