A robust body of research suggests that entrepreneurial activities benefit from financial development and external financing access. However, there is a gap on understanding how and the extent to which the accessibility to financial services is associated with entrepreneurial activity. Using an unbalanced panel of 2,104 Brazilian municipalities spanning 2010-2021 and comprised of 23,769 municipality-year observations, our results not only confirm that bank accessibility, proxied by the number of bank branches in a municipality, is positively correlated with the number of firms, but also that the relationship is nonlinear, being stronger for larger firms. By estimating a model using first differences we find a positive causal impact of an additional bank branch on the number of firms in a municipality of 0.2% (about 26 extra firms on average). Our study contributes to the literature by corroborating that access to external financing services shapes entrepreneurial activities.
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