Author(s) Guangdong Xu, Wenming Xu and Binwei Gui Keywords China’s economic miracle has been achieved at considerable environmental cost. To fight against environmental pollution more effectively, the Chinese government established the Ministry of Environmental Protection (MEP) in 2008. This study investigates the stock market reaction to this event and finds that, on average, listed firms in polluting industries experienced a statistically and economically significant negative abnormal return on the event date, which implies that the compliance costs of these polluting firms are expected to increase. In addition, this study finds that enterprises with different ownership styles and different political influence experienced different price reactions during the event window. More specifically, state-owned enterprises (SOEs) in general experienced a less negative abnormal return over different event windows, and provincial SOEs perform much better than central SOEs and sub-provincial SOEs. Abstract administrative reform, environmental protection, stock market reaction, SOEs Author(s) Bio Guangdong Xu (corresponding author, guangdongx@cupl.edu.cn) is a Professor of Law and Economics at the School of Law and Economics (SLE) at the China University of Political Science and Law (CUPL). His research focuses on law and economic growth, financial regulation, and China’s political economy. Wenming Xu is an Associate Professor of Law and Economics at the SLE at the CUPL. His research focuses on empirical legal studies, financial regulation, and corporate finance. Binwei Gui is an Associate Professor of Law and Economics at the SLE at the CUPL. His research focuses on China’s economic growth, financial regulation, and anti-monopoly law. DOI: https://doi.org/10.1017/jea.2018.32