Increased bond market liquidity slashes corporate borrowing costs significantly.
The study looked at how easy it is to sell a corporate bond after it's issued and how that affects the interest rate the company has to pay. They found that when a bond is expected to be easier to sell, the interest rate at issuance is lower. In fact, a 10% increase in expected ease of selling can lead to an 8-14% decrease in the interest rate. This means that how easy it is to sell a bond can have a big impact on how much a company has to pay to borrow money.