Abstract
Durnev, Morck and Yeung(2004a) show that more informative stock prices facilitate more efficient corporate investment. I first show how stock prices informativeness affect firm’s investment-cash flow sensitivity. Using China’s listed companies from manufacturing industry between 2001 and 2008, I find strong negative relations between stock prices informativeness and investment-cash flow sensitivity, the investment-cash flow sensitivity decreases significantly with increasing stock price informativeness. The empirical results also strongly support the point that more informative stock price facilitate more efficient capital allocation.