Regulatory Sandboxes and Fintech Funding: Evidence from the UK

Review of Finance

53 Pages Posted: 15 Dec 2020 Last revised: 20 Apr 2023

See all articles by Giulio Cornelli

Giulio Cornelli

Bank for International Settlements (BIS)

Sebastian Doerr

Bank for International Settlements; Centre for Economic Policy Research (CEPR)

Leonardo Gambacorta

Bank for International Settlements (BIS); Centre for Economic Policy Research (CEPR)

Ouarda Merrouche

University of Lausanne

Multiple version iconThere are 2 versions of this paper

Date Written: April 2023

Abstract

Over 50 countries have introduced regulatory sandboxes to foster financial innovation. This paper conducts the first evaluation of their ability to improve fintechs' access to capital and attendant real effects. Exploiting the staggered introduction of the UK sandbox, we establish that firms entering the sandbox see an increase of 15% in capital raised post-entry. Their probability of raising capital increases by 50%. Sandbox entry also has a significant positive effect on survival rates and patenting. Investigating the mechanism, we present evidence consistent with lower asymmetric information and regulatory costs.

Keywords: regulatory sandbox, fintech, start-ups, venture capital, innovation

JEL Classification: G24, G38, M13, O38

Suggested Citation

Cornelli, Giulio and Doerr, Sebastian and Gambacorta, Leonardo and Merrouche, Ouarda, Regulatory Sandboxes and Fintech Funding: Evidence from the UK (April 2023). Review of Finance, Available at SSRN: https://ssrn.com/abstract=3727816 or http://dx.doi.org/10.2139/ssrn.3727816

Giulio Cornelli

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

Sebastian Doerr (Contact Author)

Bank for International Settlements ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

HOME PAGE: http://www.sdoerr.com

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Leonardo Gambacorta

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Ouarda Merrouche

University of Lausanne ( email )

Quartier Chambronne
Lausanne, Vaud CH-1015
Switzerland

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