Effective investment is an important driving factor for the growth of the company and the growth of future cash flow, and it is the root of an enterprise to increase its value. However, according to the relevant research data, the excessive investment and underinvestment of listed companies in China are common, and the phenomenon of inefficient investment is serious. Therefore, how to restrain the inefficient investment of the listed companies to improve their investment efficiency has become one of the problems to be solved in practice. Because of information asymmetry, the size of free cash flow affects the size of the investment, which makes the company have a tendency to overinvest or underinvestment. But the dividend agent model also shows that the distribution of cash dividends will help enterprises to mitigate agency conflicts in order to reduce moral hazard, to solve the adverse selection problem caused by information asymmetry, and ultimately curb the interaction between investment and free cash flow. In this paper, based on the principal-agent theory and accounting theory, the research methods such as theoretical research and empirical research are adopted. This paper studies the correlation of free cash flow, cash dividend and over-investment, taking listed companies in China as samples. And the results of this study show that:(1) free cash flow and over investment are positively correlated; (2) cash dividend has restrictive effect on over investment.