This research aims to investigate the effect of corporate governance and financial development on the investment-cash flow sensitivity. In order to analyze the topic, this research use US REIT companies data from 1997-2016 as the sample. Corporate governance variables used are independent board directors and audit committee meetings, while for financial development variables, we incorporate number of analysts and credit rating as the measurement. This research used Generalized Method of Moments (GMM) and instrument variables to deal with the Q measurement error issue. The result showed that most of corporate governance and financial development variables give negative significant effect on investment-cash flow sensitivity. Looking more detail for more constrained and less constrained REITs, the result is consistent that most of corporate governance and financial development variables give negative significant effect on investment-cash flow sensitivity, but the result is more pronounced for more constrained REIT companies. This study also found that during crisis period REIT companies will reduce the use of cash flow to fund their investment activities. Those findings give implications for REIT managers, especially for more constrained REITs, to improve their corporate governance and financial development, so that they can have better access to external funds in capital market and use it to boost their investment activities.

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