Abstract: Investment-cash flow sensitivity is often used to represent the level of corporate financing constraints. However, by comparing the operating characteristics between financing constraints and investment-cash flow sensitivity in the real estate industry from 2000 to 2011, it can be found that after 2007 both of them present a totally opposite breaking structure. This kind of deviation inosculates with the discourse of non-monotony relationship between the two in the KZ criticism. The theoritical analysis indicates that the non-monotony can be attributed to the changes of corporate precautionary motives, i.e., there exists the conductive logic of “financing constraint↑→precautionary motive↑→investment-cash flow sensitivity↓”. While the liquidity smoothing model based on the precautionary motive can further verify the existence of the above-mentioned path, thus it can provide evidence of precautionary motive for KZ criticism

Key words: financing constraint; investment-cash flow sensitivity; precautionary motive; working capital management