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Review of Finance Vol. 28 No. 1 2024

Regulatory Sandboxes and Fintech Funding: Evidence from the UK

Giulio Cornelli1,2; Sebastian Doerr1; Leonardo Gambacorta1; Ouarda Merrouche3

1 Monetary and Economic Department, Bank for International Settlements , Basel, · 2 University of Zurich , Zürich, · 3 Université Paris Nanterre and EconomiX CNRS UMR 7235 , Paris,

open access

Abstract

Over fifty countries have introduced regulatory sandboxes to foster financial innovation. This article 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.

DOI
10.1093/rof/rfad017
Volume
28
Issue
1
Pages
203-233
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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