Research has documented a significant relationship between financial leverage and investment decisions, however divergent views exist about whether this relationship is explained by the underinvestment hypothesis or the overinvestment hypothesis. This study examines the relationship between financial leverage and investment decisions for firms with different growth opportunities, it is based on a sample of 51 industrial sector firms listed on the Johannesburg Stock Exchange (JSE), South Africa, over the period from 2008 to 2014. Using panel data and after controlling for heterogeneity across firms, we report a negative relationship between leverage and investment. However, the relationship is significant for firms with high growth opportunities and insignificant for firms in the low growth category. The results support the underinvestment theory that debt overhang reduces the incentives of firms exploiting valuable opportunities.