Abstract
I document a positive direct link between mutual fund flow-driven price pressure and future corporate investment. High price pressure firms with high investments have lower future stock returns and operational performance than high price pressure firms with low investments. Investment sensitivity to price pressure is stronger for firms with high churn rates (shorter horizon) and firms with high R&D intensity (with more opaque assets) and remains positive and significant for firms that are less financially constrained, suggesting there is a channel between stock price pressure and corporate investment that is independent of external financing.
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