Regulatory Sandboxes and Fintech Funding: Evidence from the UK

BIS Working Paper, No 901

39 Pages Posted: 15 Dec 2020 Last revised: 30 Mar 2021

See all articles by Giulio Cornelli

Giulio Cornelli

Bank for International Settlements (BIS)

Sebastian Doerr

Bank for International Settlements

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: March 2021

Abstract

Over 50 countries have introduced regulatory sandboxes to foster financial innovation. This paper conducts the first systematic evaluation of their ability to improve fintechs' access to capital. Exploiting the staggered introduction of the UK sandbox, we compare firms in earlier to those in later cohorts. Firms entering the sandbox see an increase of 15% in capital raised post-entry; their probability of raising capital increases by 50%. We present evidence that the sandbox facilitates access to capital by reducing asymmetric information and regulatory costs. Controlling for confounding factors at the firm- or investor-level through fixed effects does not affect our findings.

Keywords: 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 (March 2021). BIS Working Paper, No 901, 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

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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