Employee affective conflict (EAC) is a critical form of emotional workplace friction widely acknowledged in management practice and research. We argue and validate that employee rating dispersion is an EAC proxy, as conflict begins with disagreements. Akin to physical labor frictions, EAC increases operating leverage, systematic risk exposures, and costs of capital. As a result, EAC negatively correlates with future corporate capital expenditures. Physical labor frictions, financial constraints, uncertainty, and investment irreversibility exacerbate the adverse effects of EAC on investment. Firms experiencing heightened EAC exhibit weaker future operating performance. Our findings underscore the crucial role of emotion in corporate decision-making.