61 Pages Posted: 5 Jan 2022 Last revised: 8 Apr 2024

See all articles by Ben Charoenwong

Ben Charoenwong

National University of Singapore - Department of Finance; Chicago Global

Zachary T Kowaleski

University of Texas at Austin

Alan Kwan

The University of Hong Kong

Andrew Sutherland

Massachusetts Institute of Technology

Date Written: January 1, 2024


Compliance-driven investments in technology—or “RegTech”—are growing rapidly. To understand the effects on the financial sector, we study firms’ responses to new internal control requirements. Affected firms make significant investments in ERP and hardware. These expenditures then enable complementary investments that are leveraged for noncompliance purposes, leading to modest savings from avoided customer complaints and misconduct. IT budgets rise and profits fall, especially at small firms, and acquisition activity and market concentration increase. Our results illustrate how regulation can directly and indirectly affect technology adoption, which in turn affects noncompliance functions and market structure.

Keywords: RegTech, FinTech, technology adoption, financial regulation, compliance, internal controls, complementary investments, software bundling

JEL Classification: G23, G30, G38, L51, M42, O31

Suggested Citation

Charoenwong, Ben and Kowaleski, Zach and Kwan, Alan and Sutherland, Andrew, RegTech (January 1, 2024). MIT Sloan Research Paper 6563-22, Journal of Financial Economics (JFE), Vol. 154, No. 103792, 2024, Available at SSRN: or

Ben Charoenwong

National University of Singapore - Department of Finance ( email )

Mochtar Riady Building
15 Kent Ridge Drive
Singapore, 119245


Chicago Global ( email )

67 AYER RAJAH CRESCENT, #02-10/17, Singapore
Singapore, 139950


Zach Kowaleski

University of Texas at Austin ( email )

2317 Speedway
Austin, TX Texas 78712
United States

Alan Kwan

The University of Hong Kong ( email )

Pokfulam Road
Hong Kong, Pokfulam HK

Andrew Sutherland (Contact Author)

Massachusetts Institute of Technology ( email )

100 Main Street
Cambridge, MA 02142
United States

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