Zhaoming (Richard) Shi

Job Market Paper

"Trade Credit Delay and the Real Effects of Prompt-Payment Regulation" (with Jing Wu)   

About one-quarter of trade-credit obligations are paid late, and larger buyers pay later than smaller ones. Using granular Dun & Bradstreet payment records, we show that this delay is selective: larger firms delay a greater share of invoices, but not a greater share of dollars, and the invoices they delay are disproportionately small. We develop a dynamic model in which downstream buyers source from heterogeneous, relationship-specific suppliers and optimally stretch payables, trading off the working-capital benefits of delay against the risk of disrupting valuable supplier relationships. We estimate the model by simulated method of moments, targeting moments on payment behavior and buyer–supplier relationship dynamics. Motivated by prompt-payment regulation such as the EU Late Payment Directive, we evaluate a mandate requiring on-time payment. The mandate lowers the exit rate of incumbent suppliers from 6.6 to 2.2 percent, but it shifts the working-capital burden onto buyers, raising their financing needs by 25 percent. Buyers respond primarily by accumulating precautionary cash, but this adjustment does not fully absorb the shock: they shrink their supplier networks by 4 percent and reduce input order sizes by 4.2 percent. These extensive and intensive margin adjustments reduce output by 4.1 percent. Prompt payment regulation therefore protects incumbent matches but shrinks the overall supply base and contracts 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.