Zhaoming (Richard) Shi

Job Market Paper

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

About one-quarter of trade-credit obligations are paid late, and larger buyers pay later than smaller buyers. Using granular Dun & Bradstreet payment records, we show that delay is selective: larger buyers delay a greater share of invoices, but not a greater share of dollars, and their delayed invoices are disproportionately small relative to their average payment size. We build a dynamic model in which downstream buyers source from heterogeneous relationship-specific suppliers and optimally delay trade credit payment by trading off the working-capital benefit of delay against the risk of supply chain disruption. We estimate the model by simulated method of moments, targeting empirical moments on realized payment speed and supplier relationships. Motivated by prompt-payment regulation such as the EU Late Payment Directive, we evaluate a mandate requiring full on-time payment. In stationary partial equilibrium, the mandate reduces mean supplier exit probability from 5.38 to 2.58 percent and raises total input expenditure by 2.85 percent. Buyers replace delayed supplier financing primarily with cash; cash holdings rise by about 60 percent and bank borrowing by 15 percent. Improved retention supports a larger active supplier base with less new relationship formation. Purchased inputs and productive capital expand, raising output by 1.21 percent, while dividends and firm value increase only slightly. Tight bank credit can limit these production gains, while expanding credit beyond the benchmark has little additional effect.

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? Following the Chodorow-Reich design, we construct credit-supply shocks from firms’ pre-crisis bank exposures and subsequent lender health. Firms at the 75th percentile of pre-crisis EBC usage experience a 22.5 percent smaller contraction in labor growth than firms at the 25th percentile. 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, eliminating the option to use EBC lowers aggregate capital by 11.9 percent, employment by 24.0 percent, and output by 14.7 percent relative to the baseline with EBC. These findings show how financing embedded in employee compensation shapes firm adjustment and aggregate activity under financial frictions.

"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.