Corporate bond ETFs provide stable funding to US companies, producing tangible impacts on both operations and valuations. Exogenous ETF rule changes establish a causal link between bond ETF ownership and R&D spending, particularly for speculative-grade issuers. As to the mechanisms, ETF ownership leads to a decrease in firms’ cost of debt and a loosening of covenants restricting risky investments, enabling financially constrained firms to capitalize on their internal growth opportunities. A theoretical model incorporating institutional features of bond ETFs shows that sufficiently productive firms will optimally issue extra debt to ensure their bonds are ETF-eligible.