We examine the effect of investment lumpiness on firms' default risk. A structural model is established and shows that firms with lumpier (or more indivisible) investments will encounter higher credit risk, all else being equal. We use the model solutions to simulate investment and default dynamics for a variety of firms structurally similar to their empirical counterparts. Using the relative size of investments, time between investments, and the skewness of investment rates as the proxies of investment lumpiness, the regression exercises of the simulated samples demonstrate that the degree of lumpiness is monotonically related to the probability of default. The models' implications are generally supported by reduced-form tests using actual data. This article sheds new light on the linkage between firms' investment patterns and default risk.