The "Mystery of the Porter Hypothesis" of Corporate Debt Default Under Carbon Risk

China’s economic restructuring has focused on managing the interaction between environmental regulation and development security to achieve safe carbon reduction. While the increased carbon risk caused by lower carbon emissions encourages businesses to move more quickly toward green governance, it may also cause operational challenges due to regulatory costs and increase the risk of financial default. To that end, this paper discusses the impact of carbon risk on corporate debt defaults in China by using the Paris Agreement as a quasi-natural experiment. The study discovers that the release of the Paris Agreement, a strong carbon regulation signal, dramatically reduces debt defaults by China's high-carbon enterprises. The results of the channel tests point to three potential mechanisms of action for businesses: enhanced green innovation, decreased financial leverage, and increased operational and legal compliance. The additional analysis finds that these effects are more significant when enterprises are subjected to greater financial market monitoring, fierce industry competitiveness, analyst attention, and media criticism. The study on carbon risk and corporate debt default is improved by this work, which also offers valuable theoretical underpinnings and policy recommendations for implementing the new development concept and fostering high-quality development in the context of the dual carbon objective