Bank Accessibility and Entrepreneurial Activity: Evidence from Brazil

Rodrigo Leite, Matheus Moura, Layla Mendes and Leonardo Henrique Lima de Pilla
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Matheus Moura: EBAPE Brazilian School of Public and Business Administration, Getulio Vargas Foundation, Rio de Janeiro 22250-900, Brazil
Layla Mendes: EPGE Brazilian School of Economics and Finance, Fundação Getulio Vargas, São Paulo 01313-902, Brazil
Leonardo Henrique Lima de Pilla: EBAPE Brazilian School of Public and Business Administration, Getulio Vargas Foundation, Rio de Janeiro 22250-900, Brazil

IJFS, 2024, vol. 12, issue 2, 1-11

Abstract: A robust body of research suggests that entrepreneurial activities benefit from financial development and external financing access. However, there is a gap in understanding how and the extent to which the accessibility to financial services is associated with entrepreneurial activity. Based on an unbalanced panel of 2104 Brazilian municipalities spanning 2010–2021 and comprising 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.

Keywords: financial development; external financing access; entrepreneurship (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2024
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