I examine the effect of cash holdings on the relationship between cash flow volatility and corporate investment. My results call into question the long-assumed negative association between cash flow volatility and corporate investment. Using an expanded dataset of U.S. domestic firms, I show that firms with high cash holdings increase investment in the face of increasing cash flow volatility, whereas firms with low cash holdings lower their investment expenditure. In doing so, I provide empirical evidence in support of recent theoretical models predicting that the sensitivity of investment to cash flow volatility is dependent on the level of balance sheet cash holdings. My results are robust to a number of model specifications.