The purpose of this study is to analyze the effect of financial constraints onsensitivity of investment to cash flow for the Chinese listed manufacturingcompanies from 2000 to 2009. The endogenous switching regression modelbased on Tobin’s q theory is used. The estimation result indicates that acompany belonging to high premium regime has a higher sensitivity ofinvestment to cash flow for all cases. In addition, the result shows that underthe same regime, the sensitivity of investment to cash flow depends on theownership structure. While a private company is more likely to be included inhigh premium regime than a state-owned company, state-owned company’ssensitivity of investment to cash flow is higher than that of private company incase of high premium and low premium regime respectively. It implies thatChinese listed state-owned companies spend more surplus cash flow oninvestment.