Yang Zhao
Yang Zhao
I am a fifth-year Finance Ph.D. student and job market candidate at the Stanford Graduate School of Business. My research interest is in empirical corporate finance and financial intermediation. I will be available for interviews at the 2020 ASSA Annual Meeting in San Diego.
Job Market Paper
This paper examines the effect of a firm's liquidity holdings on its real investments and its impact on broader outcomes. I exploit the regulation-driven increase in the supply of wealth management products (WMPs) -- deposit alternatives issued in the shadow banking sector -- as a shifter of liquidity holdings by Chinese firms. I find that an increase in corporate liquidity leads to a sharp reduction in capital and R&D expenditures by firms. Using exogenous variation in banks' WMP supply induced by regulation, I argue that the effect of corporate liquidity holdings on real investments is causal. I find the reduction in real investments leads to a decrease in firm-level TFP, patent application, primary business revenue, and employment. Aggregating firm-level responses at the regional level in a difference-in-difference setting that uses the same regulatory shock suggests that the growth of corporate liquidity holdings has a negative impact on local economic outcomes. Cities more exposed to banks that increased their supply of WMPs exhibit slower capital and consumption growth. My findings suggest that a firm's liquidity holding decisions have a direct impact on its real investments and broader economic activities.