This paper examines the impact of financial constraints on corporate investment, focusing on the role of asset tangibility. The authors develop a theoretical framework that suggests that when firms can pledge their assets as collateral, investment and borrowing become endogenous, leading to a credit multiplier effect. This effect is particularly significant for firms facing credit constraints, where investment-cash flow sensitivities increase with the tangibility of assets. However, for unconstrained firms, asset tangibility has no effect on investment-cash flow sensitivities. The study uses a differences-in-differences approach to identify the effect of financing frictions on corporate investment, comparing the differential effect of asset tangibility on investment sensitivity across different regimes of financial constraints. The empirical analysis is based on a large sample of manufacturing firms from COMPUSTAT between 1985 and 2000, using various measures of asset tangibility and robustness tests. The results support the hypothesis that asset tangibility significantly affects the cash flow sensitivity of investment for financially constrained firms, while having no effect for unconstrained firms.This paper examines the impact of financial constraints on corporate investment, focusing on the role of asset tangibility. The authors develop a theoretical framework that suggests that when firms can pledge their assets as collateral, investment and borrowing become endogenous, leading to a credit multiplier effect. This effect is particularly significant for firms facing credit constraints, where investment-cash flow sensitivities increase with the tangibility of assets. However, for unconstrained firms, asset tangibility has no effect on investment-cash flow sensitivities. The study uses a differences-in-differences approach to identify the effect of financing frictions on corporate investment, comparing the differential effect of asset tangibility on investment sensitivity across different regimes of financial constraints. The empirical analysis is based on a large sample of manufacturing firms from COMPUSTAT between 1985 and 2000, using various measures of asset tangibility and robustness tests. The results support the hypothesis that asset tangibility significantly affects the cash flow sensitivity of investment for financially constrained firms, while having no effect for unconstrained firms.