We examine the relation between corporate governance and managerial risk-taking behavior. In light of the global financial crisis, the importance of effective governance structures in protecting claimholder interests cannot be emphasized enough. For corporate governance, we propose to include both shareholder antitakeover defenses and bondholder covenant structure to create an overall governance structure. We find that the overall corporate governance structure has a significant impact on how managers make decisions on investment policy. More importantly, bondholder and shareholder governance have conflicting effects on investment policy. The relative strength of the two governance structures determines the risk of the firms’ investment portfolios and thus the wealth effects of the claimholders.