Hai Zhang is Chancellor’s Fellow at Strathclyde Business School in Glasgow and is specialised in Financial Innovation. He’s a visiting professor at EM Strasbourg for the first time this year. Laurent Weill, director of the LaRGE Research Center, was very pleased to interview him on his most recent studies.
Hello Hai, could you tell us more about your professional background?
Hello! My name is Hai Zhang and I’m a Chancellor’s Fellow in Finance at Strathclyde Business School in Glasgow since 2017. This position is similar to assistant professor, but it focuses more on research than teaching. Prior to that, I was a PhD researcher, fully funded by the Economic Society Research Council (ESRC), at The University of Glasgow. I also taught economics and finance courses during my time there.
Before coming to the UK in 2013, I obtain a MSc degree and Bachelor Degree awarded by Hunan University, China.
What are your main topics of research?
My research mainly focuses on market frictions and its applications in corporate investment and financing decisions.
First, I am working on a project that investigates the impact of optimal debt and priority structure on the intertwined corporate financing and investment decisions in a dynamic trade-off model. We attempt to investigate the impact of debt heterogeneity and its priority structure on corporate investment in a dynamic trade-off model where firms simultaneously use bank and market debt.
Second, my research introduces innovative swaps both in small and medium-sized enterprises financing and the hedge fund seeding business to alleviate the serious financing constraints due to the asymmetric information. For SME financing, we consider the investment timing and financing decisions of financially constrained SMEs in a dynamic setting with asymmetric information. We find asymmetric information induces high-type firms to speed up investment, leading to higher guarantee costs.
Third, I also want to talk about algorithmic trading. My recent publication, co-authored with Dr Youngmin Ha at New Jersey City University, at European Journal of Operational Research, develops an optimal intraday trading algorithm to reduce overall transaction costs by absorbing price shocks for online portfolio selection. In that paper, we consider the largely ignored but most important liquidity risk in our trading algorithm. The algorithm optimises the number of intraday trades and finds an optimal intraday trading path under limited market liquidity.
What is – according to you – your most significant contribution in terms of results to research?
I would say the most significant contribution of my research is the introduction of innovative financial contracts, like equity-for-guarantee swaps, in Entrepreneurship, SME financing and the hedge fund seeding business. To be more specific, the aim of these innovative financial contracts is to alleviate the financial constraints faced either by entrepreneurs or early stage hedge fund (ESF) managers who want to launch new business projects.
Our contribution is that we provide a theoretical asset-pricing framework, which provides closed form solutions for seed capital and other contingent claims. We also shed light on how fees-for-seed swap solves the serious problem of widespread financing constraints for new and early-stage funds (ESFs) managers.
According to you, what are the most promising fields of research in finance these days?
I think there are plenty of promising research fields such as Information economics, asymmetric information or Debt Heterogeneity but I’m really interested in Financial Technology (FinTech). Due to the increase of computing power and the use of Big Data, there are endless opportunities for academic analysis and designing new models to can be beneficial for numerous companies.
Which advice would you give to Ph.D. students or young professors?
My advice is to prioritize publishing from the beginning. During my PhD program, I was lucky enough to have a great supervisor who not only helped me with my thesis but also pushed me to co-work with him on research papers that were finally published in good journals. These publications gave me an edge to land an academic job more easily. Now as PhD supervisor, I often co-work with my PhD students and one of my co-authored papers with my PhD student is going to be published soon.
Also being a young professor myself, I would like to share some of my experience on academic writing to other young professors. The Pomodoro Technique can be very useful in terms of effective time management. It’s a system that enables people to more productive by breaking your workday into 25-minute blocks and avoiding any distraction during those moments.
Thank you very much Hai for taking the time to answer our questions!