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The main objectives of this study are to examine the impact of stock price performance on firm’s investment and to investigate the counter impact of changes in investment expenditures on stock price performance. The random effects model was applied on the panel data of Chinese manufacturing firms listed at the Shanghai Stock Exchange and the Shenzhen Stock Exchange during the period 2002 to 2016. The sample contains 398 firms with 5,970 observations. Although there is a statistically significant and negative relationship between stock price and investment expenditures, the impact of stock price on investment expenditures is far greater than that of investment expenditures on stock price. Information asymmetry positively mediates both investment sensitivity to stock prices and stock prices sensitivity to investment. This study is a valuable contribution toward the analysis of investment decision making by …