ZHAO, Xiao

FINA – Year 04

Homepage
https://sites.google.com/view/xiao-zhao

Research Interests
Empirical Corporate Finance, Global Supply Chain, Sustainable Finance

Job Market Paper

Collateral Values and Global Production Networks

Firms are interconnected through global production networks. In this study, I investigate how changes in a firm’s collateral value affect its supply chain linkages with international trade partners. I use a plausibly exogenous shock to the real estate market in China, which reduced the value of firms’ real estate holdings, and find an 11.1% reduction in exports to trade partners in the US. Financially constrained firms affected by the shock respond by increasing product prices, potentially compromising long-term customer relationships. Connected U.S. customers reallocate their imports to alternative suppliers, thereby inducing a shift to the global production network structure. My findings highlight the role of collateral value in transmitting shocks along the supply chain. Fluctuations in the value of collateral interacting with financial frictions, drive adjustments in trade partnerships.