Global economic crises appear to strongly affect corporate bankruptcy rates. However, several prior studies indicate that changes in default risk are strongly negatively related to equity returns, which in turn depend predominately on country-specific factors. This suggests that country effects – and not global effects – should dominate changes in default risk. To analyse this issue, we decompose changes in default risk, changes in the fundamental determinants of default risk and equity returns into global, country and industry effects. We proxy for default risk through Merton (1974) default risk estimates and CDS rates. Our evidence reveals that changes in default risk always depend most strongly on global and industry effects. However, the magnitude of country effects in equity returns correlates positively with economic stability, rendering it dependent on the sample period. Our results have implications for the management of credit-sensitive securities.