This paper uses the Dealscan database, a comprehensive collection of private corporate lending agreements, to provide large-sample tests of the debt covenant hypothesis. Dealscan offers several advantages over previous data sources, including larger sample sizes, more representative samples, and detailed covenant information. The authors find strong support for the debt covenant hypothesis, indicating that private lenders use debt covenants as "trip wires" for borrowers and set them tightly. Technical violations occur relatively frequently, about 30% of the time, and are not necessarily associated with financial distress. The paper also provides evidence that leverage is a poor proxy for closeness to debt covenants. The findings suggest that managers have strong incentives to avoid initial covenant violations but these incentives weaken after an initial violation, leading to multiple violations. The study contributes to the understanding of the economic role of debt covenants and the process of contracting in private lending agreements.This paper uses the Dealscan database, a comprehensive collection of private corporate lending agreements, to provide large-sample tests of the debt covenant hypothesis. Dealscan offers several advantages over previous data sources, including larger sample sizes, more representative samples, and detailed covenant information. The authors find strong support for the debt covenant hypothesis, indicating that private lenders use debt covenants as "trip wires" for borrowers and set them tightly. Technical violations occur relatively frequently, about 30% of the time, and are not necessarily associated with financial distress. The paper also provides evidence that leverage is a poor proxy for closeness to debt covenants. The findings suggest that managers have strong incentives to avoid initial covenant violations but these incentives weaken after an initial violation, leading to multiple violations. The study contributes to the understanding of the economic role of debt covenants and the process of contracting in private lending agreements.