<p>This study systematically examines how air pollution affects the cross-regional investment decisions of a comprehensive panel of Chinese A-share listed firms and the underlying mechanisms. We find that air pollution significantly promotes firms’ cross-regional investment, and these results hold across a battery of robustness checks. The results of mechanism analyses indicate that air pollution induces cross-regional investment primarily by increasing the costs of labor, environmental compliance, and credit. Heterogeneity analyses show that this positive effect is more pronounced among privately owned firms and those facing tighter financing constraints, lower resource dependence, higher labor intensity, and heavier pollution exposure. Additional evidence suggests that as air pollution intensifies, cross-regional investment increasingly reduces firms’ financial risk and improves their operational efficiency. Furthermore, local governments are more likely to provide environmental subsidies to firms undertaking cross-regional investment in response to rising air pollution than those that do not invest, with the aim of mitigating pollution-induced relocation pressure and maintaining local economic stability.</p>