Environmental regulation is a main driver for corporate environment strategies. Applying the deterrence theory,the mechanic of how environmental regulation plays its governance role is analyzed,and the important channel of peer effect for the deterrence of environmental regulation is testified empirically. The empirical results,derived by using the data of listed companies in 2007-2015 and adopting the Heckman model,show that government environmental regulation has adeterrent effect of increasing the environmental protection investment of the peer firms. Firm size,severity of penalty,and media reportall affect the deterrence effect of environmental regulation: the larger the penalized firm,the more severe the punishment and the larger the effect of media report,the stronger the deterrence effect on peer firms. The industrial competition can strengthen the deterrence effect. Therefore,it can be concluded that by improving the certainty,typicality and strictness of punishments,with the media coverage and competition,the deterrence of environmental regulation can be strengthened.