Pub Date : 2025-12-30DOI: 10.1016/j.intfin.2025.102281
Amétépé Egbétoké, Loredana Ureche-Rangau
The paper investigates whether and how climate vulnerability affects public debt. We focus on a region that is highly vulnerable to climate change, but scarcely explored, namely Sub-Saharan Africa. On a sample of annual data covering 38 Sub-Saharan African countries over the period 2000–2022, our results highlight a negative relationship between the debt-to-GDP ratio and climate vulnerability. This relationship holds even when we control for several factors, namely financial crises, sovereign defaults or debt relief programs. Moreover, we account for cross-country dependence and heterogeneity and use variables measuring organized violence and adaptive capacity to climate change as instruments for climate vulnerability. When analyzing the impact of fiscal rules, our results show evidence that while climate vulnerability reduces the debt-to-GDP ratio in countries with expenditure and credible budget balance rules, establishing revenue and credible debt rules may alleviate the funding squeeze.
{"title":"Vulnerability to climate change and funding squeeze in Sub-Saharan Africa","authors":"Amétépé Egbétoké, Loredana Ureche-Rangau","doi":"10.1016/j.intfin.2025.102281","DOIUrl":"10.1016/j.intfin.2025.102281","url":null,"abstract":"<div><div>The paper investigates whether and how climate vulnerability affects public debt. We focus on a region that is highly vulnerable to climate change, but scarcely explored, namely Sub-Saharan Africa. On a sample of annual data covering 38 Sub-Saharan African countries over the period 2000–2022, our results highlight a negative relationship between the debt-to-GDP ratio and climate vulnerability. This relationship holds even when we control for several factors, namely financial crises, sovereign defaults or debt relief programs. Moreover, we account for cross-country dependence and heterogeneity and use variables measuring organized violence and adaptive capacity to climate change as instruments for climate vulnerability. When analyzing the impact of fiscal rules, our results show evidence that while climate vulnerability reduces the debt-to-GDP ratio in countries with expenditure and credible budget balance rules, establishing revenue and credible debt rules may alleviate the funding squeeze.</div></div>","PeriodicalId":48119,"journal":{"name":"Journal of International Financial Markets Institutions & Money","volume":"107 ","pages":"Article 102281"},"PeriodicalIF":6.1,"publicationDate":"2025-12-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145883927","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-29DOI: 10.1016/j.intfin.2025.102279
Ozan E. Akbas , Frank Betz , Luca Gattini
This paper proposes a methodology to estimate the aggregate financing needs of firms that are bankable yet discouraged from applying for a loan. Our data come mainly from the 2018–2020 Enterprise Survey and cover 35 emerging and developing economies. Drawing on the literature on corporate bankruptcy prediction, we develop a model with elastic net regularization to predict the outcome of loan applications. Our approach suggests that 38% of discouraged firms would have had their loan application approved, signaling inefficient self-rationing. Using this information, we estimate an aggregate credit gap of 5.4% of GDP, with significant variation across countries. Small and medium-sized enterprises account for more than two-thirds of the total, reflecting both their contribution to economic activity and the fact that they are more likely to be credit-constrained.
{"title":"Quantifying credit gaps using survey data on discouraged borrowers","authors":"Ozan E. Akbas , Frank Betz , Luca Gattini","doi":"10.1016/j.intfin.2025.102279","DOIUrl":"10.1016/j.intfin.2025.102279","url":null,"abstract":"<div><div>This paper proposes a methodology to estimate the aggregate financing needs of firms that are bankable yet discouraged from applying for a loan. Our data come mainly from the 2018–2020 Enterprise Survey and cover 35 emerging and developing economies. Drawing on the literature on corporate bankruptcy prediction, we develop a model with elastic net regularization to predict the outcome of loan applications. Our approach suggests that 38% of discouraged firms would have had their loan application approved, signaling inefficient self-rationing. Using this information, we estimate an aggregate credit gap of 5.4% of GDP, with significant variation across countries. Small and medium-sized enterprises account for more than two-thirds of the total, reflecting both their contribution to economic activity and the fact that they are more likely to be credit-constrained.</div></div>","PeriodicalId":48119,"journal":{"name":"Journal of International Financial Markets Institutions & Money","volume":"107 ","pages":"Article 102279"},"PeriodicalIF":6.1,"publicationDate":"2025-12-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145884001","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-26DOI: 10.1016/j.intfin.2025.102282
Çiğdem Vural-Yavaş , Seda Bilyay-Erdogan
This study examines the impact of interest rate uncertainty on corporate environmental, social, and governance (ESG) performance, using an international dataset covering 8,296 firm-year observations. We present novel evidence that short-term and long-term interest rate uncertainty have a positive impact on ESG performance, with the estimated impact of short-term uncertainty being approximately three times greater than that of long-term uncertainty. Our findings remain robust when we employ alternative variable definitions, samples, model specifications, and methodologies that address endogeneity issues. Next, we identify potential transmission channels: long-term interest rate uncertainty affects ESG through corporate investments and financial constraints, while short-term uncertainty does so via corporate risk-taking. Finally, we empirically demonstrate that country-level institutional factors moderate the long-term interest rate uncertainty – ESG link, such that the positive impact of long-term interest rate uncertainty on corporate ESG performance is less pronounced for the firms in countries with more institutional quality. Overall, the results underscore the significance of macro-financial uncertainty in shaping firms’ sustainability practices.
{"title":"Navigating uncertainty: How do interest rate fluctuations affect ESG performance?","authors":"Çiğdem Vural-Yavaş , Seda Bilyay-Erdogan","doi":"10.1016/j.intfin.2025.102282","DOIUrl":"10.1016/j.intfin.2025.102282","url":null,"abstract":"<div><div>This study examines the impact of interest rate uncertainty on corporate environmental, social, and governance (ESG) performance, using an international dataset covering 8,296 firm-year observations. We present novel evidence that short-term and long-term interest rate uncertainty have a positive impact on ESG performance, with the estimated impact of short-term uncertainty being approximately three times greater than that of long-term uncertainty. Our findings remain robust when we employ alternative variable definitions, samples, model specifications, and methodologies that address endogeneity issues. Next, we identify potential transmission channels: long-term interest rate uncertainty affects ESG through corporate investments and financial constraints, while short-term uncertainty does so via corporate risk-taking. Finally, we empirically demonstrate that country-level institutional factors moderate the long-term interest rate uncertainty – ESG link, such that the positive impact of long-term interest rate uncertainty on corporate ESG performance is less pronounced for the firms in countries with more institutional quality. Overall, the results underscore the significance of macro-financial uncertainty in shaping firms’ sustainability practices.</div></div>","PeriodicalId":48119,"journal":{"name":"Journal of International Financial Markets Institutions & Money","volume":"107 ","pages":"Article 102282"},"PeriodicalIF":6.1,"publicationDate":"2025-12-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145840013","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-20DOI: 10.1016/j.intfin.2025.102277
Shujie Wang , Liyan Han , Xiaoguang Yang , Tongshuai Qiao
Although prior studies suggest that investor regret is a salient behavioral force in emerging markets, the factors driving the regret (REG) premium remain underexplored. This paper fills this gap by investigating the underlying drivers within China’s distinctive market and institutional context. Using portfolio sorts and Fama-MacBeth regressions from 1995 to 2024, we find that high-REG stocks earn significantly higher risk-adjusted returns. Further analyses reveal that the REG premium is stronger for non-state-owned enterprises, during periods of high market volatility, in low-information environments, and when investor sentiment is weak. Liquidity improvements, greater market openness, and higher institutional participation substantially attenuate the effect. Robustness checks using alternative benchmarks, extended estimation horizons, and an orthogonalized measure confirm that the REG premium is a robust and persistent market anomaly. Overall, our findings suggest that improvements in the market environment help reduce mispricing, providing broader insights into behavioral asset pricing and financial liberalization in emerging markets.
{"title":"What Drives the Regret Premium: Evidence from China","authors":"Shujie Wang , Liyan Han , Xiaoguang Yang , Tongshuai Qiao","doi":"10.1016/j.intfin.2025.102277","DOIUrl":"10.1016/j.intfin.2025.102277","url":null,"abstract":"<div><div>Although prior studies suggest that investor regret is a salient behavioral force in emerging markets, the factors driving the regret (REG) premium remain underexplored. This paper fills this gap by investigating the underlying drivers within China’s distinctive market and institutional context. Using portfolio sorts and Fama-MacBeth regressions from 1995 to 2024, we find that high-REG stocks earn significantly higher risk-adjusted returns. Further analyses reveal that the REG premium is stronger for non-state-owned enterprises, during periods of high market volatility, in low-information environments, and when investor sentiment is weak. Liquidity improvements, greater market openness, and higher institutional participation substantially attenuate the effect. Robustness checks using alternative benchmarks, extended estimation horizons, and an orthogonalized measure confirm that the REG premium is a robust and persistent market anomaly. Overall, our findings suggest that improvements in the market environment help reduce mispricing, providing broader insights into behavioral asset pricing and financial liberalization in emerging markets.</div></div>","PeriodicalId":48119,"journal":{"name":"Journal of International Financial Markets Institutions & Money","volume":"107 ","pages":"Article 102277"},"PeriodicalIF":6.1,"publicationDate":"2025-12-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145797348","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-18DOI: 10.1016/j.intfin.2025.102265
Jinhyeong Jo , Doojin Ryu
We suggest a model in which General Partners (GPs) can have incentives to distort valuations in continuation funds, an increasingly common vehicle in private equity. GPs may inflate valuations to raise fees under asymmetric information and misaligned incentives between exit and rolling Limited Partners (LPs). Such distortion diminishes when the proportion of rolling LPs is higher and when the GP faces stronger prospects of raising follow-on funds. We characterize the model under Limited Partner Advisory Committee (LPAC) approval and investor participation. We propose governance measures to strengthen valuation integrity by capturing the bargaining dynamics between exit and rolling LPs.
{"title":"Do GPs truly present fair value? The case of continuation funds","authors":"Jinhyeong Jo , Doojin Ryu","doi":"10.1016/j.intfin.2025.102265","DOIUrl":"10.1016/j.intfin.2025.102265","url":null,"abstract":"<div><div>We suggest a model in which General Partners (GPs) can have incentives to distort valuations in continuation funds, an increasingly common vehicle in private equity. GPs may inflate valuations to raise fees under asymmetric information and misaligned incentives between exit and rolling Limited Partners (LPs). Such distortion diminishes when the proportion of rolling LPs is higher and when the GP faces stronger prospects of raising follow-on funds. We characterize the model under Limited Partner Advisory Committee (LPAC) approval and investor participation. We propose governance measures to strengthen valuation integrity by capturing the bargaining dynamics between exit and rolling LPs.</div></div>","PeriodicalId":48119,"journal":{"name":"Journal of International Financial Markets Institutions & Money","volume":"107 ","pages":"Article 102265"},"PeriodicalIF":6.1,"publicationDate":"2025-12-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145797347","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-15DOI: 10.1016/j.intfin.2025.102274
Lu Jolly Zhou, Wanqing Zheng, Haotian Tang, Xinru Li
This paper examines how stock market liberalization affects product market competitiveness in emerging economies. Using the Mainland China-Hong Kong Stock Connect program as a quasi-natural experiment, we employ a staggered difference-in-differences approach. The empirical evidence shows that stock market liberalization, on average, is associated with an increase of 19.45% in firms’ market share relative to the sample mean. This effect operates through improving information disclosure and enhancing product quality. The effect is more pronounced for firms in growth and maturity lifecycle stages, with stronger corporate reputations, and better governance structures. The further evidence suggests while financial globalization generally enhances competitive positioning, it simultaneously intensifies short-term predation risks as increased transparency provides competitors with strategic insights.
{"title":"Opportunity or challenge? The impact of stock market liberalization on product market competitiveness","authors":"Lu Jolly Zhou, Wanqing Zheng, Haotian Tang, Xinru Li","doi":"10.1016/j.intfin.2025.102274","DOIUrl":"10.1016/j.intfin.2025.102274","url":null,"abstract":"<div><div>This paper examines how stock market liberalization affects product market competitiveness in emerging economies. Using the Mainland China-Hong Kong Stock Connect program as a quasi-natural experiment, we employ a staggered difference-in-differences approach. The empirical evidence shows that stock market liberalization, on average, is associated with an increase of 19.45% in firms’ market share relative to the sample mean. This effect operates through improving information disclosure and enhancing product quality. The effect is more pronounced for firms in growth and maturity lifecycle stages, with stronger corporate reputations, and better governance structures. The further evidence suggests while financial globalization generally enhances competitive positioning, it simultaneously intensifies short-term predation risks as increased transparency provides competitors with strategic insights.</div></div>","PeriodicalId":48119,"journal":{"name":"Journal of International Financial Markets Institutions & Money","volume":"107 ","pages":"Article 102274"},"PeriodicalIF":6.1,"publicationDate":"2025-12-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145797344","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-15DOI: 10.1016/j.intfin.2025.102267
Alexandros Skouralis
This paper provides the first comprehensive quantification of the systemic risk posed by non-listed financial institutions in the UK, focusing on building societies, digital-only challenger banks, and foreign-owned retail banks. Using an indirect estimation approach, systemic risk is measured through balance sheet characteristics, calibrated against listed institutions’ SRISK values. The findings reveal that Nationwide ranks among the top ten systemically important institutions, while several other building societies contribute significantly to aggregate systemic risk. In contrast, digital-only challenger banks exhibit low systemic risk due to high equity ratios and limited interconnectedness, despite rapid growth and persistent financial losses. Santander, a foreign-owned retail bank, emerges as the ninth most systemically important institution, with risk levels comparable to systemically-important domestic banks. We conduct extensive robustness checks, including alternative predictors and SRISK specifications, out-of-sample forecasting, and Principal Component Analysis, which confirms the strong co-movement between building societies and the largest UK banks. Finally, we compare SRISK with traditional Z-score metrics to highlight their complementary nature. These findings underscore the need to extend systemic risk frameworks beyond listed entities and support calls to expand the stress testing perimeter to include large non-listed and foreign-owned firms.
{"title":"Systemic risk under the radar: Evidence from building societies and challenger banks","authors":"Alexandros Skouralis","doi":"10.1016/j.intfin.2025.102267","DOIUrl":"10.1016/j.intfin.2025.102267","url":null,"abstract":"<div><div>This paper provides the first comprehensive quantification of the systemic risk posed by non-listed financial institutions in the UK, focusing on building societies, digital-only challenger banks, and foreign-owned retail banks. Using an indirect estimation approach, systemic risk is measured through balance sheet characteristics, calibrated against listed institutions’ SRISK values. The findings reveal that Nationwide ranks among the top ten systemically important institutions, while several other building societies contribute significantly to aggregate systemic risk. In contrast, digital-only challenger banks exhibit low systemic risk due to high equity ratios and limited interconnectedness, despite rapid growth and persistent financial losses. Santander, a foreign-owned retail bank, emerges as the ninth most systemically important institution<strong>,</strong> with risk levels comparable to systemically-important domestic banks. We conduct extensive robustness checks, including alternative predictors and SRISK specifications, out-of-sample forecasting, and Principal Component Analysis, which confirms the strong co-movement between building societies and the largest UK banks. Finally, we compare SRISK with traditional Z-score metrics to highlight their complementary nature. These findings underscore the need to extend systemic risk frameworks beyond listed entities and support calls to expand the stress testing perimeter to include large non-listed and foreign-owned firms.</div></div>","PeriodicalId":48119,"journal":{"name":"Journal of International Financial Markets Institutions & Money","volume":"107 ","pages":"Article 102267"},"PeriodicalIF":6.1,"publicationDate":"2025-12-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145797346","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-15DOI: 10.1016/j.intfin.2025.102278
Nikhil Srivastava , David Tripe , Mamiza Haq , Mui Kuen Yuen
This paper studies the effects of financial market development on bank deposits in a cross-country setting. Our empirical evidence shows that investors in developed and developing economies engage with financial markets differently, leading to varying impacts on bank deposits. For instance, in financially developed economies, financial markets typically complement the banking sector by facilitating deposit growth. Conversely, in financially developing economies, financial markets and banks often compete for deposits, thereby constraining bank deposits growth. This dynamic, however, is shaped by country-specific factors such as market concentration and the level of deposit insurance. Moreover, we find that financial market development increases per capita savings, which in turn strengthens bank deposit growth. These findings remain consistent across a range of model specifications and robustness checks.
{"title":"Financial market development and bank deposits","authors":"Nikhil Srivastava , David Tripe , Mamiza Haq , Mui Kuen Yuen","doi":"10.1016/j.intfin.2025.102278","DOIUrl":"10.1016/j.intfin.2025.102278","url":null,"abstract":"<div><div>This paper studies the effects of financial market development on bank deposits in a cross-country setting. Our empirical evidence shows that investors in developed and developing economies engage with financial markets differently, leading to varying impacts on bank deposits. For instance, in financially developed economies, financial markets typically complement the banking sector by facilitating deposit growth. Conversely, in financially developing economies, financial markets and banks often compete for deposits, thereby constraining bank deposits growth. This dynamic, however, is shaped by country-specific factors such as market concentration and the level of deposit insurance. Moreover, we find that financial market development increases per capita savings, which in turn strengthens bank deposit growth. These findings remain consistent across a range of model specifications and robustness checks.</div></div>","PeriodicalId":48119,"journal":{"name":"Journal of International Financial Markets Institutions & Money","volume":"107 ","pages":"Article 102278"},"PeriodicalIF":6.1,"publicationDate":"2025-12-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145797345","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-09DOI: 10.1016/j.intfin.2025.102266
Wei Wang , Yun Wen , Haoxi Yang , Jiaohui Yang
This study draws on individual-level data from the global football market to examine compensating wage premia for national institutional risk. Using a large panel dataset comprising 243,099 football players across 150 economies from 2010 to 2023, we demonstrate that players employed in economies with high institutional risk receive higher wages as compensation. The main findings remain robust across a series of tests, including alternative measures of institutional risk, additional control variables, different clustering methods, and various subsample analyses. Further analysis reveals that cross-border mobility and institutional adaptability significantly influence the wage premia. Players of higher capability and those from home economies with advanced football development generally possess greater bargaining power and hence secure higher compensation for institutional risk. Likewise, foreign players, particularly those facing larger institutional distance between their home and host economies, command higher wage premia to offset adaptation costs in unfamiliar institutional environments.
{"title":"Institutional risk and wage premia","authors":"Wei Wang , Yun Wen , Haoxi Yang , Jiaohui Yang","doi":"10.1016/j.intfin.2025.102266","DOIUrl":"10.1016/j.intfin.2025.102266","url":null,"abstract":"<div><div>This study draws on individual-level data from the global football market to examine compensating wage premia for national institutional risk. Using a large panel dataset comprising 243,099 football players across 150 economies from 2010 to 2023, we demonstrate that players employed in economies with high institutional risk receive higher wages as compensation. The main findings remain robust across a series of tests, including alternative measures of institutional risk, additional control variables, different clustering methods, and various subsample analyses. Further analysis reveals that cross-border mobility and institutional adaptability significantly influence the wage premia. Players of higher capability and those from home economies with advanced football development generally possess greater bargaining power and hence secure higher compensation for institutional risk. Likewise, foreign players, particularly those facing larger institutional distance between their home and host economies, command higher wage premia to offset adaptation costs in unfamiliar institutional environments.</div></div>","PeriodicalId":48119,"journal":{"name":"Journal of International Financial Markets Institutions & Money","volume":"107 ","pages":"Article 102266"},"PeriodicalIF":6.1,"publicationDate":"2025-12-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145747844","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-01DOI: 10.1016/j.intfin.2025.102238
Chu Pan , Chentong Sun , Yue Zhang , Yanshuang Li , Muhammad Abubakr Naeem
This study examines the relationship between climate change exposure and the sovereign credit risk of 51 countries from 2010 to 2020. The findings suggest that countries with higher climate change exposure tend to exhibit greater sovereign credit risk. Additionally, GDP per capita and the growth of government debt act as mediating factors, suggesting that climate change exposure is linked to sovereign creditworthiness through economic and fiscal channels. Furthermore, developing countries tend to bear higher credit costs under climate change exposure, whereas sovereign credit risk in developed countries appears more sensitive to such exposure. Lastly, the negative association between climate change exposure and sovereign credit risk appears weaker in countries with stronger governance. This study underscores the significant association between climate change exposure and sovereign credit risk, offering new insights for research on climate-related financial risks.
{"title":"Climate change exposure and global sovereign credit risk","authors":"Chu Pan , Chentong Sun , Yue Zhang , Yanshuang Li , Muhammad Abubakr Naeem","doi":"10.1016/j.intfin.2025.102238","DOIUrl":"10.1016/j.intfin.2025.102238","url":null,"abstract":"<div><div>This study examines the relationship between climate change exposure and the sovereign credit risk of 51 countries from 2010 to 2020. The findings suggest that countries with higher climate change exposure tend to exhibit greater sovereign credit risk. Additionally, GDP per capita and the growth of government debt act as mediating factors, suggesting that climate change exposure is linked to sovereign creditworthiness through economic and fiscal channels. Furthermore, developing countries tend to bear higher credit costs under climate change exposure, whereas sovereign credit risk in developed countries appears more sensitive to such exposure. Lastly, the negative association between climate change exposure and sovereign credit risk appears weaker in countries with stronger governance. This study underscores the significant association between climate change exposure and sovereign credit risk, offering new insights for research on climate-related financial risks.</div></div>","PeriodicalId":48119,"journal":{"name":"Journal of International Financial Markets Institutions & Money","volume":"107 ","pages":"Article 102238"},"PeriodicalIF":6.1,"publicationDate":"2025-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145692207","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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