, which are disproportionately affected by climate change, raises significant concerns. This study shows that sovereign risk …. Countries with elevated risk levels are disproportionately vulnerable to climate change compared to their lower-risk … vulnerability to climate change, in terms of sovereign risk, particularly for countries with low spreads and long-term debt …

We show that the prospect of a debt renegotiation favorable to shareholders reduces the firm's equity risk. The equity … favors liquidations over renegotiations. In the limit, when debt contracts cannot be renegotiated, the equity risk is … threat of strategic default can reduce the firm's equity risk …