Too Fast to Transition? Decarbonization Speed, Profitability, and Corporate Default Risk—Evidence from China

: How fast should firms decarbonize? We develop a dynamic corporate transition model in which decarbonization speed is an endogenous choice under adjustment costs, financing frictions, and innovation uncertainty. The model implies an interior “safe-speed corridor”: profitability peaks at moderate speeds, whereas default risk rises when firms decarbonize too slowly or too fast. Using 4,157 Chinese A-share firms (2008–2022), we construct a disclosure-based transition index and derive a firm-year transition-speed measure from it, and triangulate these text-based measures using independent action indicators including environmental expenditures and carbon-intensity-related metrics. Empirically, transition speed is inverted-U shaped with profitability (ROE) and U-shaped with distance-to-default, consistent with an interior optimum. Mechanism tests show that environmental performance and green investment support value creation at moderate speeds, while leverage and innovation uncertainty transmit downside risk at high speeds. Institutional complements matter: green finance and high-quality disclosure flatten the speed–risk trade-off, whereas stringent regulation may steepen it for financially constrained and high-emission firms. The findings inform corporate transition planning and policy design aimed at managing climate-related financial stability risks in emerging markets.