Using a unique database of 190 newly privatized firms from 36 countries, we investigate the impact of shareholders’ identity on corporate risk-taking behavior. We find strong and robust evidence that state (foreign) ownership is negatively (positively) related to corporate risk-taking. Moreover, we find that the high risk-taking by the foreign owners depends on the country-level governance institutions. Our results suggest that relinquishment of government control, openness to foreign investment, and improvement of country-level governance institutions are key factors in the corporate risk-taking behavior.