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Regulatory Sandboxes and Fintech Funding: Evidence from the UK

Author

Listed:
  • Giulio Cornelli
  • Sebastian Doerr
  • Leonardo Gambacorta
  • Ouarda Merrouche

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.

Suggested Citation

  • Giulio Cornelli & Sebastian Doerr & Leonardo Gambacorta & Ouarda Merrouche, 2024. "Regulatory Sandboxes and Fintech Funding: Evidence from the UK," Review of Finance, European Finance Association, vol. 28(1), pages 203-233.
    • Handle: RePEc:oup:revfin:v:28:y:2024:i:1:p:203-233.
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    File URL: http://hdl.handle.net/10.1093/rof/rfad017
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    More about this item

    Keywords

    Regulatory sandbox; Fintech; Start-ups; Venture capital; Innovation;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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