Can environmental regulation reform increase corporate environmental investment? Evidence from China’s “Double Random, One Disclosure” policy

Using data of Chinese A-share listed firms in heavy pollution industries from 2014 to 2023, this paper examines the effect of “Double Random, One Disclosure” policy on corporate environmental investment. The results indicate that the policy significantly induces regulated firms to increase their environmental investment. This effect is more pronounced for firms with higher managerial short-termism, lower media attention, and those located in low-marketization regions. Mechanisms analysis shows that the double-random environmental regulation significantly curtails firms’ rent-seeking opportunities and enhances managers’ attention to environmental issues, thereby promoting corporate environmental investment. Moreover, double-random environmental regulation effectively prompts firms to achieve green transformation. Overall, the findings highlight the role of incorporating randomness into environmental regulation and offer practical guidance for policymakers seeking to strengthen environmental governance. • The “Double Random, One Disclosure” policy significantly induces regulated firms to increase their environmental investment. • The policy’s impact varies by the level of managerial short-termism, corporate media attention, and marketization of the region. • The policy raises firms’ environmental investment by curbing rent-seeking and increasing managerial attention to environmental issues. • Double-random environmental regulation can effectively prompt firms to achieve green transformation.