Theoretical　predictions　on　the　impact　of　environmental　regulations　on　firm　value　in　stock　market　are　inconclusive.　This　paper　examines　whether　and　how　stock　market　reacts　to　environmental　regulations　in　China.　We　find　that　overall　market-wide　reactions　are　inconclusive　while　the　cross-sectional　tests　show　that　stocks　in　polluting　industries　significantly　and　robustly　underperform　other　stocks.　Moreover,　the　worsening　effect　of　environmental　regulations　on　firm　value　is　more　pronounced　among　firms　without　political　connections　and　firms　located　in　rons　with　more　effective　judicial　enforcement　as　the　investors　expect　that　these　regulations　will　be　effectively　enforced.　Our　results　show　that　China＇s　green　campaign　does　have　value　implications　for　stock　markets.　(C)　2019　Elsevier　Ltd.　All　rights　reserved.