The Impact of Industry-Level Demand Tail Risks on Firm’s Entry and Exit: Evidence from Chinese Manufacturing Sector

Junfan Ren, Cong Yu, Xiangyun Xu and Dongdan Jiao

Chinese Economy, 2025, vol. 58, issue 5, 371-387

Abstract: We utilize the data of manufacturing industries in China to estimate industry-level demand tail risks, and explore whether and how the demand tail risks affect the entry and exit of firms. Empirical results indicate that: (1) Demand tail risks indeed can suppress the entry of firm and exaggerate exit significantly through three channels: depressing entrepreneur’s confidence, deteriorating firm’s financing constraints and reducing firm’s TFP; (2) Such impacts are heterogeneous across different firms and industries. This paper enriches the literature on the factors influencing the firms’ entry and exit, and also carry out some policy implications.

Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:mes:chinec:v:58:y:2025:i:5:p:371-387

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DOI: 10.1080/10971475.2024.2437221

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